SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended March 31, 2002
OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from ______________________ to _______________________

Commission File Number 1-2661

CSS INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 13-1920657
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1845 Walnut Street, Philadelphia, PA 19103
- ------------------------------------ -------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (215) 569-9900
-------------------

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class Name of each exchange on which registered
- -------------------------------- -----------------------------------------
Common Stock, $.10 par value New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None
----------------
(Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No ____
-----

Securities registered pursuant to Section 12(g) of the Act:

(Page 1 of Cover Page)

None
----------------
(Title of class)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant is approximately $172,046,652. Such aggregate market value was
computed by reference to the closing price of the Common Stock of the Registrant
on the New York Stock Exchange on May 16, 2002 ($38.35 per share). Such
calculation excludes the shares of Common Stock beneficially owned at such date
by certain directors and officers of the Registrant, by the Farber Foundation
and by the Farber Family Foundation, as described under the section entitled
"CSS SECURITY OWNERSHIP" in the Proxy Statement to be filed by the Registrant
for its 2002 Annual Meeting of Stockholders. In making such calculation,
Registrant does not determine the affiliate or non-affiliate status of any
holders of the shares of Common Stock for any other purpose.

At May 16, 2002, there were outstanding 8,612,794 shares of Common
Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant's Proxy Statement for its 2002 Annual Meeting of
Stockholders are incorporated by reference in Part III (under Items 10, 11, 12
and 13).

(Page 2 of Cover Page)

The Company amends its Form 10-K filed on May 24, 2002, for the fiscal year
ended March 31, 2002, to correct the presentation of four numbers in the
Edgarized version of the Consolidated Statements of Cash Flows. The Consolidated
Statements of Cash Flows was inadvertently changed by our third party service
provider and presented four numbers as negative which should have been positive.

Part I

Item 1. Business
General

CSS Industries, Inc. ("CSS" or the "Company") is a consumer products
company primarily engaged in the design, manufacture, procurement 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, Easter egg dyes and novelties
and educational products. CSS provides its retail customers the opportunity to
use a single vendor for much of their seasonal product requirements. CSS'
product breadth, product innovation, creative design, manufacturing and
packaging flexibility, product quality and customer service are key to
sustaining the Company's market leadership position. A substantial portion of
CSS' products are manufactured, packaged and warehoused in twenty-one North
American facilities, with the remainder purchased primarily from Asian
manufacturers. The Company's products are sold to its customers by national and
regional account managers and by a network of independent manufacturers'
representatives. The Company is comprised of The Paper Magic Group, Inc. ("Paper
Magic"), acquired by the Company in August 1988, Berwick Industries LLC
("Berwick"), acquired in May 1993, and Cleo Inc ("Cleo"), acquired in November
1995. During March 2002, Berwick completed the acquisition of substantially all
of the business and assets of the portion of C. M. Offray & Son, Inc. ("Offray")
which manufactures and sells decorative ribbon products, floral accessories and
narrow fabrics for apparel, craft and packaging applications. Subsequent to the
acquisition, Berwick changed its name to Berwick Offray LLC ("Berwick Offray").

The Company has experienced growth through a combination of acquisitions
and the expansion of existing operations. The Company's goal is to continue to
expand by developing new or complementary products, by entering new markets, by
acquiring companies that are complementary with its existing operating business
and by acquiring other businesses with leading market positions.

Principal Products CSS designs, manufactures and distributes a broad
range of seasonal consumer products primarily through the mass market
distribution channel. Christmas products include gift wrap, gift bags, boxed
greeting cards, gift tags, tissue paper, paper and vinyl decorations, and
decorative ribbons and bows. CSS' Valentine product offerings include classroom
exchange Valentine cards and other related Valentine products, while its Easter
product offerings include Dudley's(R) brand of Easter egg dyes and related
Easter seasonal products. For Halloween, CSS offers a full line of Halloween
merchandise including make-up, costumes, masks and novelties. In addition to
seasonal products, CSS also designs and markets decorative ribbons and bows to
its mass market, retail and wholesale distribution customers and teachers' aids
to the education market through the mass market, school supply distributors and
direct-to-retail teachers' stores.

CSS manufactures and warehouses its products in twenty-one facilities
located in Pennsylvania, Maryland, South Carolina, Alabama, Tennessee, Texas,
New York and Canada. Boxed greeting cards, gift tags, paper and vinyl
decorations and classroom exchange Valentine products are primarily produced and
warehoused in six facilities in central and northeastern Pennsylvania.
Manufacturing processes include a wide range of finishing, assembly and
packaging operations. Halloween make-up and Easter egg dye products are
manufactured to specific proprietary formulae by contract manufacturers who meet
regulatory requirements for the formularization and packaging of such products
and are distributed from one facility in northeastern Pennsylvania and one
facility in New York. Ribbons and bows are manufactured and warehoused in
thirteen facilities located in northeastern Pennsylvania, Maryland, South
Carolina, Alabama, Texas and Canada. The manufacturing process is vertically
integrated. Non woven ribbon and bow products are primarily made from
polypropylene resin, a petroleum-based product, which is mixed with color
pigment, melted and pressed through an extruder. Large rolls of extruded film go
through various combinations of manufacturing processes before being made into
bows or packaged on ribbon spools or reels as required by various markets and
customers. Woven fabric ribbons are manufactured both domestically and in Mexico
and sourced from Asia and Latin America. Domestic woven products are either
narrow woven or converted from bulk rolls of wide width textiles. Manufacturing
of gift wrap, including web printing, finishing, rewinding and packaging are
performed in one facility in Memphis, Tennessee. Finished goods are warehoused
and shipped from both the production facility and a separate facility in
Memphis. Other products, designed to the specifications of CSS, are imported
from Asian manufacturers.

- 1 -

Sales and Marketing Most of CSS' products are sold in the United States and
Canada by national and regional account sales managers, inside sales
representatives, product specialists and by a network of independent
manufacturers' representatives. CSS maintains permanent showrooms in New York
City, Memphis, Minneapolis, Dallas, Atlanta and Hong Kong where major retail
buyers will typically visit for a presentation and review of the new lines.
Products are also displayed and presented in showrooms maintained by these
representatives in major cities in the United States and Canada. Relationships
are developed with key retail customers by CSS sales personnel and the
independent manufacturers' representatives. Customers are generally mass
merchandise retailers, warehouse clubs, drug and food chains, independent card
shops and retail teachers' stores. CSS' revenues are primarily seasonal with
approximately 68% of sales related to the Christmas season and the remaining
sales relating to the Halloween, Easter and Valentine's Day seasons and
all-occasion product sales. Seasonal products are generally designed and
marketed beginning approximately eighteen to twenty months before the event and
manufactured during an eight to ten month production cycle. With such long lead
time requirements, timely communication with outsourcing factories, retail
customers and independent manufacturers' representatives is critical to the
timely production of seasonal products. Because the products themselves are
primarily seasonal, sales terms do not generally require payment until after the
holiday, in accordance with industry practice. In general, CSS products are not
sold under guaranteed or return privilege terms. All-occasion ribbon and bow
products are also sold through inside sales representatives or independent
manufacturers representatives to wholesale distributors and independent small
retailers who serve the floral, craft and retail packaging trades. The Company
also sells custom products to private label customers, to other social
expression companies, and to converters of the company's bulk gift wrap or
ribbon products. Custom products are sold by both independent manufacturers'
representatives and CSS sales managers.

Due to the ever increasing competitive retail environment, CSS plays a
crucial role in helping the retailer develop programs to meet revenue objectives
while appealing to consumers' tastes. These objectives are met through the
development and manufacture of custom configured and designed products. CSS'
years of experience in program development and product quality are key
competitive advantages in helping retailers meet their objectives.

Competition CSS' principal competitor in Christmas products is Plus Mark,
Inc. (a subsidiary of American Greetings Corporation). Image Arts, a subsidiary
of Hallmark Cards, Inc., is also a competitor in the boxed greeting card
business. Historically, CSS has not competed directly, except to a limited
extent, with other product offerings of Hallmark Cards, Inc. and American
Greetings Corporation. In recent years, these companies have expanded their
promotional offerings to the mass market retail distribution channel. CSS also
competes with various companies in each of its other seasonal product offerings.
Certain of these competitors are larger and have greater resources than the
Company.

CSS believes its products are positioned adequately for continued growth
in their primary markets. Since competition is based primarily on price, timely
delivery, creative design and increasingly, the ability to serve major retail
customers with single, combined product shipments for each holiday event, CSS'
product driven focus combined with consistent service levels allows it to
compete effectively in its core markets.

- 2 -

Employees

At May 16, 2002, approximately 3,600 persons were employed by CSS
(increasing to approximately 4,870 as seasonal employees are added).

With the exception of the bargaining units at the gift wrap facilities in
Memphis, Tennessee and the ribbon manufacturing facilities in Hagerstown,
Maryland, which totaled 725 employees as of May 16, 2002, CSS employees are not
represented by labor unions. Because of the seasonal nature of certain of its
businesses, the number of production employees fluctuates during the year.

The Company believes that relationships with its employees are good.

- 3 -

Item 2. Properties

The following table sets forth the location and approximate square
footage of the Company's major manufacturing and distribution facilities:

Approximate Square Feet
-----------------------
Location Use Owned Leased
-------- --- ----- ------

Elysburg, PA Manufacturing and distribution 253,000 -
Elysburg, PA Manufacturing 68,000 -
Danville, PA Distribution 133,000 -
New Berlin, PA Manufacturing - 31,000
Troy, PA Manufacturing and distribution 223,000 -
Canton, PA Distribution 135,000 -
Berwick, PA Manufacturing and distribution 216,000 -
Berwick, PA Manufacturing and distribution 220,000 -
Berwick, PA Distribution 226,000 -
Berwick, PA Distribution - 521,000
Berwick, PA Distribution - 36,000
Memphis, TN Manufacturing and distribution - 986,000
Memphis, TN Distribution - 366,000
Hagerstown, MD Manufacturing and distribution 284,000 -
Hagerstown, MD Manufacturing and distribution 97,000 -
Hagerstown, MD Distribution - 31,000
Hartwell, SC Manufacturing 229,000 -
Anniston, AL Manufacturing and distribution 120,000 -
Anniston, AL Distribution - 28,000
El Paso, TX Distribution - 100,000
Quebec, Canada Distribution 28,000 -
--------- ---------
Total 2,232,000 2,099,000
========= =========

The Company also utilizes owned and leased space aggregating 123,000
square feet for various marketing and administrative purposes. The headquarters
and principal executive office of the Company are located in Philadelphia,
Pennsylvania.

The Company is also the lessee of approximately 14,000 square feet of
retail space (which was related to former operations) which have been subleased
by the Company, as sublessor, to various sublessees.

Item 3. Legal Proceedings

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

- 4 -

Part II

Item 5. Market for Common Equity and Related Stockholder Matters

(a) Principal Market for Common Stock

The Common Stock of the Company is listed for trading on the New York
Stock Exchange. The following table sets forth the high and low sales prices per
share of that stock for each of the quarters during fiscal 2002 and fiscal 2001.

High Low
---- ---

2002
First Quarter................................................ $26.35 $21.00
Second Quarter............................................... 25.99 23.55
Third Quarter................................................ 31.17 25.30
Fourth Quarter............................................... 32.51 24.76

2001
- ----
First Quarter................................................ $20.44 $18.50
Second Quarter............................................... 20.94 19.50
Third Quarter................................................ 21.75 18.63
Fourth Quarter............................................... 24.44 20.13

(b) Holders of Common Stock

At May 16, 2002, there were approximately 1,630 holders of the
Company's Common Stock.

The Company has not declared or paid any dividends on its Common Stock
for more than the past three fiscal years. The ability of the Company to pay any
cash dividends on its Common Stock is dependent on the Company's earnings and
profits and cash requirements and is further limited by the terms of the
Company's revolving line of credit. The Company does not anticipate that it will
declare or pay any cash dividends on its Common Stock for the foreseeable
future.

At May 16, 2002, there were no shares of preferred stock outstanding.

- 5 -

Item 6. Selected Financial Data
(In thousands, except per share amounts)

Three Month
Periods
Year Ended
Ended March 31, Years Ended December 31,
March 31, ------------------ --------------------------------------------
2002 2001 2000 2000 1999 1998(a) 1997
----------- ---- ---- ------ ------ -------- ------
(Unaudited)

Statement of Operations Data:
Net Sales............................ $424,309 $26,987 $24,589 $421,084 $408,867 $417,526 $372,733

Income (loss) from continuing
operations before income taxes..... 33,455 (9,194) (9,604) 28,406 28,442 37,926 30,442

Income (loss) from continuing
operations......................... 21,501 (6,080) (6,147) 18,231 18,061 24,276 18,871

Income from discontinued operations,
net of income taxes................ - - - - - - 6,348

Gain on sale of discontinued operations,
net of income taxes................ - - - - - - 17,871

Net income (loss).................... 21,501 (6,080) (6,147) 18,231 18,061 24,276 43,090

Income (loss) from continuing
operations per common share
Basic ............................. $2.44 $(.69) $(.66) $2.02 $1.85 $2.26 $1.74

Diluted............................ $2.40 $(.69) $(.66) $2.02 $1.84 $2.21 $1.67

Balance Sheet Data:

Working capital...................... 125,398 124,171 120,402 133,397 130,889 145,165 129,245

Total assets......................... 298,495 267,448 248,784 349,543 349,398 376,590 342,362

Short-term debt...................... 200 312 424 62,961 63,488 96,198 52,524

Long-term debt....................... 165 193 434 252 537 2,131 2,580

Stockholders' equity................. $234,845 $220,945 $209,575 $227,091 $219,477 $220,493 $221,649

(a) Results for 1998 include pre-tax income of $5,309, or net income of $3,398,
related to restructuring and other special items.

- 6 -

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Business Acquisitions and Divestitures

On March 15, 2002, a subsidiary of the Company completed the acquisition of
substantially all of the business and assets of the portion of C. M. Offray &
Son, Inc. ("Offray") which manufactures and sells decorative ribbon products,
floral accessories and narrow fabrics for apparel, craft and packaging
applications. Berwick acquired substantially all of the business and assets of
Offray for approximately $44,800,000 in cash (paid from cash on hand). The
purchase price is subject to a post-closing adjustment depending upon Offray's
working capital on the date of the closing. A portion of the purchase price is
being held in escrow to cover purchase price adjustments and indemnification
obligations. The acquisition was accounted for as a purchase and the cost
approximated the fair market value of the net assets acquired.

On May 8, 2001, the Company acquired certain assets of Tye-Sil Corporation
Ltd. of Montreal, Quebec, Canada. Tye-Sil had been the leading Canadian provider
of gift wrap and accessories. In consideration, the Company paid approximately
$7,849,000 in cash, including transaction costs. The acquisition was accounted
for as a purchase and the cost approximated the fair market value of the net
assets acquired. Subsequent to the acquisition, the operations of Tye-Sil were
consolidated into existing operations of the Company.

On August 18, 1999, the Company acquired certain assets and the business of
Party Professionals, Inc. Party Professionals designed and marketed highly
crafted latex masks, helmets and accessories sold to mass merchandisers, drug
chains, party stores and gift shops. In consideration, the Company paid
$6,000,000 in cash and assumed and repaid $1,606,000 of outstanding debt. The
acquisition was accounted for as a purchase and the excess of cost over fair
market value of $6,697,000 was recorded as goodwill in the accompanying balance
sheet and until the adoption of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets," on April 1, 2002 was
being amortized over twenty years. Subsequent to the acquisition, the operations
of Party Professionals, now known as Don Post Studios, Inc., were consolidated
into existing operations of the Company.

Litigation

In February 1999, CSS was awarded approximately $11,200,000, including
interest, in settlement of a dispute primarily related to the valuation of
inventory acquired in the 1995 acquisition of Cleo Inc. The funds were
subsequently released from escrow. The award had no impact on 1999 results of
operations.

Seasonality and Change in Fiscal Year

On February 21, 2001, CSS' Board of Directors approved a change in the
Company's fiscal year end from December 31 to March 31. The transition period
commenced January 1, 2001 and ended March 31, 2001. The Company's new fiscal
year began April 1, 2001 and ended March 31, 2002 ("fiscal 2002"). With this
change, the Company's new fiscal year coincides with its natural revenue cycle.

The seasonal nature of CSS' business results in low sales and operating
losses in the first and fourth quarters and high shipment levels and operating
profits in the second and third quarters of the Company's new fiscal year,
thereby causing significant fluctuations in the quarterly results of operations
of the Company.

- 7 -

Because of the seasonality and the general industry practice of deferred
payment terms, a material portion of the Company's trade receivables are
collected in December and January, thus enabling the Company to repay the
short-term debt borrowed to fund the inventory and accounts receivable build-up
during the year.

Results of Operations

Fiscal 2002 Compared to Calendar 2000
- -------------------------------------

Consolidated sales for fiscal 2002 increased 1% to $424,309,000 from
$421,084,000 in calendar 2000. The increase was primarily due to incremental
sales from businesses acquired in fiscal 2002. Excluding incremental volume of
Tye-Sil and Offray, sales declined 3% as a cautious retail environment brought
on by a weak economy restricted seasonal purchases of large retailers.

As a percentage of sales, cost of sales improved to 73% in fiscal 2002 from
74% in calendar 2000, as improved manufacturing efficiencies and foreign
sourcing combined to improve gross margins. Selling, general and administrative
expenses, as a percentage of sales, was 19% in fiscal 2002 and 18% in calendar
2000. The increase was primarily the result of the write-off related to the
Kmart Chapter XI bankruptcy filing. Excluding this event, S,G&A expenses, as a
percentage of sales, were in line with the prior year.

Income from operations grew 6% to $35,489,000 in fiscal 2002 from
$33,363,000 in calendar 2000. Excluding the impact of the write-off related to
the Kmart Chapter XI bankruptcy filing, operating income increased 17% to
$38,969,000.

Interest expense decreased 63% to $1,898,000 from $5,080,000 in calendar
2000. The decrease was due to lower interest rates and reduced borrowings as a
result of operational cash flow and improved balance sheet management.

Income before taxes was $33,455,000, or 8% of sales in fiscal 2002 and
$28,406,000, or 7% of sales in calendar 2000. Net income for the year ended
March 31, 2002 increased 18% to $21,501,000 from $18,231,000 in calendar 2000.
Net income per diluted share increased 19% to $2.40 from $2.02 in calendar 2000.

Transition Quarter Ended March 31, 2001 Compared to Quarter Ended March 31, 2000
- --------------------------------------------------------------------------------

Consolidated sales for the three months ended March 31, 2001 were
$26,987,000 or 10% above 2000 sales of $24,589,000. The increase in sales was
primarily attributable to customer requested deferrals of Valentine and Easter
shipments from the fourth quarter of 2000 and increased sales of ribbons and
bows to the wholesale distribution channel. These increases were partially
offset by lower sales of product lines discontinued in early 2000 and lower
closeout sales.

Cost of sales, as a percentage of sales, was 74% in 2001 and 72% in 2000.
The increase in cost of sales, as a percentage of sales, was primarily due to a
charge to markdown excess inventories.

Interest expense, net decreased to $48,000 from $396,000 in 2000. The
decrease in interest expense was primarily due to lower borrowing levels as a
result of the cash generated from operations and improved management of working
capital.

- 8 -

Income taxes, as a percentage of income before taxes, were 34% in 2001 and
36% in 2000. The decreased rate for the period ended March 31, 2001 reflects the
effective tax rate for the three month transition period compared to an
estimated annual effective rate utilized for the three month period ended March
31, 2000.

The net loss for the three months ended March 31, 2001 was $6,080,000, or
$.69 per share compared to a net loss of $6,147,000, or $.66 per share, in 2000.
The decreased loss was due primarily to lower interest expense.

Calendar 2000 Compared to Calendar 1999
- ---------------------------------------

Consolidated sales for 2000 increased 3% to $421,084,000 from $408,867,000.
The increase in 2000 sales was primarily attributable to 4% growth in CSS' base
seasonal businesses as reduced sales of discontinued products partially offset
the overall improvement in volume.

As a percentage of sales, cost of sales was 74% in 2000 and 75% in 1999.
The improvement in cost of sales as a percentage of sales in 2000 was due to
improved efficiencies in the Company's manufacturing and distribution
operations.

Selling, general and administrative expenses, as a percentage of sales, was
18% in 2000 and 17% in 1999. The increase in selling, general and administrative
costs in 2000 was primarily due to costs associated with the decentralization of
the Company's management structure.

Interest expense, net was $5,080,000 in 2000 and $4,294,000 in 1999.
Interest expense increased in 2000 primarily due to the impact of higher
interest rates as operating cash flow was largely offset by incremental
borrowings to repurchase the Company's stock.

Rental and other income, net was $123,000 in 2000 and $959,000 in 1999. The
current year decrease was due to the absence in 2000 of income from the 1999
restructuring of a portion of the Company's deferred compensation liability.

Income before income taxes was $28,406,000, or 7% of sales in 2000 and
$28,442,000, or 7% of sales in 1999.

Net income for the year ended December 31, 2000 increased 1% to
$18,231,000. Net income per diluted share increased 10% in 2000 to $2.02.
Earnings per share in 2000 and 1999 were benefited by the Company's stock
repurchase program. The cumulative buyback of stock added $.18 and $.11,
respectively to income from continuing operations per diluted share.

Inflation

The financial statements are presented on a historical cost basis and do
not fully reflect the impact of prior years' inflation. The U.S. inflation rate
has been modest the past several years and the Company conducts the majority of
its business using U.S. currency. The ability to pass on inflationary costs is
uncertain due to general economic conditions and competitive situations. The
Company attempts to alleviate inflationary material and labor pressures by
increasing selling prices to help offset rising costs (subject to competitive
conditions), increasing productivity, and improving design and manufacturing
techniques.

- 9 -

Liquidity and Capital Resources

At March 31, 2002, the Company had working capital of $125,398,000 and
stockholders' equity of $234,845,000. The increase in accounts receivable, net
of reserves, from $20,174,000 in 2001 to $30,021,000 in 2002 was a result of
additional accounts receivable of $10,230,000 related to the acquisition of
Offray. Inventories, net of reserves, increased from $82,140,000 to $98,541,000
due to additional inventory of $27,269,000 related to the current year
acquisition of Offray, partially offset by the decrease in inventory of the
Company's base businesses as a result of improved inventory management. The
increase in other current assets is primarily due to the Claims Put Agreement
which allowed the Company to transfer a portion of its pre-petition Kmart
receivable to a third party. Capital expenditures were $10,007,000 and
$13,877,000 in fiscal 2002 and calendar 2000, respectively, and consisted
primarily of costs related to the implementation of an integrated computer
system in one of the Company's subsidiaries and purchases of machinery and
equipment. The increase in accrued restructuring expenses and accrued expenses
relates to the acquisition of Offray.

The Company relies primarily on cash generated from its operations and
seasonal borrowings to meet its liquidity requirements. Most CSS revenues are
seasonal with approximately 68% percent of sales being Christmas related. As
payment for sales of Christmas related products is usually not received until
after the respective holiday in accordance with general industry practice,
short-term borrowing needs increase throughout the second and third quarters,
peaking prior to Christmas and dropping thereafter. Seasonal borrowings are made
under a $75,000,000 unsecured revolving credit facility with five banks and a
receivable purchase agreement in an amount up to $100,000,000 with an issuer of
receivables-backed commercial paper. These financial facilities are available to
fund the seasonal borrowing needs and to provide the Company with sources of
capital for general corporate purposes. At March 31, 2002, there were no amounts
outstanding under these facilities. For information concerning these credit
facilities, see Note 7 of Notes to Consolidated Financial Statements.

On February 19, 1998, the Company announced that its Board of Directors had
authorized the buyback of up to 1,000,000 shares of the Company's Common Stock.
Subsequently, the Executive Committee of the Board of Directors authorized
additional repurchases of shares on terms acceptable to management. The
cumulative authorized repurchase amount is 3,000,000 shares. Any such buy back
is subject to compliance with regulatory requirements and relevant covenants of
the Company's credit facility. The Company repurchased 327,000 shares for
$9,409,000 and 543,200 shares for $10,861,000 in fiscal 2002 and calendar 2000,
respectively. There were no stock repurchases during the transition period of
January 1, 2001 through March 31, 2001.

Based on its current operating plan, the Company believes its sources of
available capital are adequate to meet its ongoing cash needs for the
foreseeable future.

Accounting Pronouncements

In June 1998 and June 2000, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities - an amendment of
FASB Statement No. 133." These statements establish accounting and reporting
standards requiring that every derivative instrument be recorded on the balance
sheet as either an asset or liability measured at its fair value. SFAS Nos. 133
and 138 also require that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
Nos. 133 and 138 are effective for fiscal years beginning after June 15, 2000.
The Company adopted SFAS No. 133, as amended by SFAS No. 138, on January 1,
2001, as required. The adoption of SFAS No. 133 was not material to the
consolidated statements of operations or financial position of the Company.

- 10 -

In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires all
business combinations be accounted for by the purchase method and adds
disclosure requirements related to business combination transactions. SFAS No.
141 also establishes criteria for the recognition of intangible assets apart
from goodwill. SFAS No. 142 addresses financial accounting and reporting for
acquired goodwill and other intangible assets. The Statement provides that
goodwill and some intangibles will no longer be amortized. SFAS No. 142 provides
specific guidance for testing goodwill for impairment. The Statement also
requires new disclosure of information about goodwill and other intangible
assets subsequent to their acquisition. The Company will adopt the provisions of
SFAS No. 142 effective with the beginning of its next fiscal year, April 1,
2002, and will discontinue the amortization of goodwill at that time. As of
March 31, 2002, goodwill totaled $39,715,000 and negative goodwill totaled
$2,393,000. For the year ended March 31, 2002, net amortization expense was
$1,213,000. Based on a preliminary review of the new standard, management
believes the Company will record a goodwill impairment charge upon adoption of
approximately $8,000,000, net of taxes, which includes the reversal of negative
goodwill. This non-cash charge will be recorded as the cumulative effect of an
accounting change. However, the Company has not completed its evaluation to
determine the exact amount of such a charge. Also, the Company believes this
charge will not affect the financial covenant calculations under the Company's
credit agreement.

SFAS No. 143, "Accounting for Asset Retirement Obligations," was issued in
June 2001. SFAS No. 143 addresses accounting and reporting for legal obligations
and related costs associated with the retirement of long-lived assets. The
Statement requires that the fair value of the liability for an asset retirement
obligation be recognized in the period incurred if a reasonable estimate of fair
value can be made. The estimated retirement costs are capitalized as part of the
carrying amount of the long-lived asset. SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002. Based on
current operations, the Company does not expect the adoption of this statement
to have a material effect on its financial position and results of operations.

SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets,"
was issued in August 2001 and is effective for fiscal years beginning after
December 15, 2001. This statement retains existing requirements to recognize an
impairment loss only if the carrying amount of a long-lived asset is not
recoverable from its undiscounted cash flows and measure any impairment loss as
the difference between the carrying amount and the fair value of the asset. SFAS
No. 144 a) removes goodwill from its scope, b) allows for probability-weighted
cash flow estimation techniques when measuring for impairment, c) requires that,
for any assets to be abandoned, the depreciable life be adjusted and the
cumulative impact of such change treated as an accounting change and d) an
impairment loss be recognized at the date a long-lived asset is exchanged for a
similar productive asset or distributed to owners in a spinoff if the carrying
value of the asset exceeds its fair value. Based on current operations, the
Company does not expect the adoption of this statement to have a material effect
on its financial position and results of operations.

Significant Accounting Policies

A summary of the Company's significant accounting policies is included in
Note 1 to the consolidated financial statements. Management believes that the
application of these policies on a consistent basis enables the Company to
provide the users of the financial statements with useful and reliable
information about the Company's operating results and financial condition.

- 11 -

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities and the reported
amounts of revenue and expenses. Judgments and assessments of uncertainties are
required in applying the Company's accounting policies in many areas. For
example, in determining the valuation of inventory and accounts receivable
reserves. Other areas in which uncertainties exist include, but are not limited
to, income tax valuation and resolution of litigation. Actual results will
inevitably differ to some extent from the estimates on which the Company's
consolidated financial statements are prepared at any given point in time.
Despite these inherent limitations, management believes that the Company's
Management's Discussion and Analysis and audited financial statements provide a
meaningful and fair perspective on the Company.

Forward-Looking and Cautionary Statements

This document contains certain forward-looking statements that are subject
to risks and uncertainties. Forward-looking statements include certain
information related to the Company's capital resources and the costs related to
operational decisions, as well as information contained elsewhere in this report
where statements are preceded by, followed by, or include the words "believes,"
"expects," "anticipates" or similar expressions. For such statements, the
Company claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. 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, and factors discussed elsewhere in
this report and the documents incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company's primary market risk exposure with regard to financial
instruments is to changes in interest rates. Pursuant to the Company's line of
credit, a change in either the lender's base rate or LIBOR would affect the rate
at which the Company could borrow funds thereunder. Based on average borrowings
of $32,670,000 for the year ended March 31, 2002, a 1% increase or decrease in
current market interest rates would have increased or decreased interest expense
by $326,700.

- 12 -

CSS INDUSTRIES, INC.
AND SUBSIDIARIES

Item 8. Financial Statements

INDEX

Page
----

Report of Independent Public Accountants..................................................... 14

Consolidated Balance Sheets - March 31, 2002 and 2001........................................ 15-16

Consolidated Statements of Operations and Comprehensive Income - for the year
ended March 31, 2002, for the three month periods ended March 31, 2001 and
2000 and for the years ended December 31, 2000 and 1999................................ 17

Consolidated Statements of Cash Flows - for the year ended March 31, 2001, for
the three month periods ended March 31, 2001 and 2000 and for the years
ended December 31, 2000 and 1999........................................................ 18

Consolidated Statements of Stockholders' Equity - for the year ended March 31,
2002, for the three month periods ended March 31, 2001 and 2000 and for the
years ended December 31, 2000 and 1999.................................................. 19-20

Notes to Consolidated Financial Statements................................................... 21-35

- 13 -

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of CSS Industries, Inc.:

We have audited the accompanying consolidated balance sheets of CSS
Industries, Inc. (a Delaware Corporation) and subsidiaries as of March 31, 2002
and 2001 and the related consolidated statements of operations and comprehensive
income, cash flows and stockholders' equity for the years ended March 31, 2002,
December 31, 2000 and 1999, and the three month period ended March 31, 2001.
These consolidated financial statements and the schedule referred to below are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CSS
Industries, Inc. and subsidiaries as of March 31, 2002 and 2001 and the results
of their operations and their cash flows for the years ended March 31, 2002,
December 31, 2000 and 1999, and the three month period ended March 31, 2001, in
conformity with accounting principles generally accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The supplemental schedule
listed in Item 14(a) is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic consolidated
financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic consolidated financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated financial
statements taken as a whole.

ARTHUR ANDERSEN LLP

Philadelphia, PA
May 14, 2002

- 14 -

CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

March 31,
-------------------------
ASSETS 2002 2001
-------- -------

CURRENT ASSETS

Cash and temporary investments...................................... $ 20,006 $ 41,687
Accounts receivable, net of allowances of $13,475 and $9,304 ....... 30,021 20,174
Inventories......................................................... 98,541 82,140
Income tax receivable............................................... 2,222 3,407
Deferred income taxes............................................... 6,408 5,714
Other current assets................................................ 19,471 8,394
-------- --------
Total current assets............................................ 176,669 161,516
-------- --------

PROPERTY, PLANT AND EQUIPMENT

Land................................................................ 1,450 524
Buildings, leasehold interests and improvements..................... 41,087 33,983
Machinery, equipment and other...................................... 101,605 85,050
-------- --------
144,142 119,557
Less - Accumulated depreciation..................................... (63,716) (57,452)
-------- --------
Net property, plant and equipment............................... 80,426 62,105
-------- --------

OTHER ASSETS

Intangible assets, net of accumulated amortization of $9,761
and $10,065..................................................... 37,656 38,535
Other............................................................... 3,744 5,292
-------- --------
Total other assets.............................................. 41,400 43,827
-------- --------
$298,495 $267,448
======== ========

- 15 -

March 31,
--------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 2002 2001
-------- --------

CURRENT LIABILITIES

Note payable ....................................................................... $ - $ -
Current portion of long-term debt................................................... 200 312
Accounts payable.................................................................... 19,413 16,890
Accrued payroll and other compensation.............................................. 5,613 4,580
Accrued restructuring expenses...................................................... 4,541 -
Accrued expenses.................................................................... 21,504 15,563
-------- --------
Total current liabilities....................................................... 51,271 37,345
-------- --------

LONG-TERM DEBT, NET OF CURRENT PORTION................................................... 165 193
-------- --------

OTHER LONG-TERM OBLIGATIONS.............................................................. 2,973 2,715
-------- --------

DEFERRED INCOME TAXES.................................................................... 9,241 6,250
-------- --------

COMMITMENTS AND CONTINGENCIES............................................................ - -

STOCKHOLDERS' EQUITY
Preferred stock, Class 2, $.01 par, 1,000,000 shares authorized..................... - -
Common stock, $.10 par, 20,000,000 shares authorized
12,366,566 shares issued and 8,585,469 outstanding at March 31, 2002..............
12,366,566 shares issued and 8,830,520 outstanding at March 31, 2001.............. 1,237 1,237
Additional paid-in capital.......................................................... 29,725 29,538
Retained earnings................................................................... 287,515 265,980
Accumulated other comprehensive income, net of tax.................................. (273) (66)
Common stock in treasury, 3,781,097 and 3,536,046 shares, at cost................... (83,359) (75,744)
-------- --------
Total stockholders' equity...................................................... 234,845 220,945
-------- --------
$298,495 $267,448
======== ========

See notes to consolidated financial statements.

- 16 -

CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

For the Year For the Three Month
Ended Periods Ended For the Years Ended
March 31, March 31, December 31,
------------ ------------------- ---------------------
2002 2001 2000 2000 1999
----- ------ ------ -------- --------
(Unaudited)

NET SALES............................................... $424,309 $26,987 $24,589 $421,084 $408,867
-------- ------- ------- -------- --------

COSTS AND EXPENSES
Cost of sales...................................... 309,409 19,963 17,639 312,586 306,129
Selling, general and administrative expenses....... 79,411 16,061 16,141 75,135 70,961
Interest expense, net of interest income of
$462, $484, $90, $123 and $175................... 1,898 48 396 5,080 4,294
Rental and other expense (income), net............. 136 109 17 (123) (959)
------- ------- ------- -------- --------
390,854 36,181 34,193 392,678 380,425
------- ------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES....................... 33,455 (9,194) (9,604) 28,406 28,442

INCOME TAX PROVISION (BENEFIT).......................... 11,954 (3,114) (3,457) 10,175 10,381
------- ------- ------- -------- --------

NET INCOME (LOSS)....................................... $21,501 $(6,080) $(6,147) $ 18,231 $ 18,061
======= ======= ======= ======== ========

NET INCOME (LOSS) PER COMMON SHARE
Basic............................................ $2.44 $(.69) $(.66) $2.02 $1.85
===== ====== ===== ==== =====

Diluted............................................ $2.40 $(.69) $(.66) $2.02 $1.84
===== ====== ===== ===== =====

- ------------------------------------------------------------------------------------------------------------------------------------

COMPREHENSIVE INCOME (LOSS)
Net income (loss)................................. $21,501 $(6,080) $(6,147) $ 18,231 $ 18,061
Change in fair value of interest rate
swap agreements, net.......................... (196) (66) - - -
Foreign currency translation adjustment........... (11) - - - -
----- -------
Comprehensive income (loss)....................... $21,294 $(6,146) $(6,147) $ 18,231 $ 18,061
======= ======= ======= ======== ========

See notes to consolidated financial statements.

- 17 -

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

(In thousands)

For the Year For the Three Month
Ended Periods Ended For the Years Ended
March 31, March 31, December 31,
------------ ------------------- -------------------
2002 2001 2000 2000 1999
-------- -------- -------- -------- --------
(Unaudited)

Cash flows from operating activities:
Net income (loss)........................................... $ 21,501 $ (6,080) $ (6,147) $ 18,231 $ 18,061
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................. 11,645 2,655 2,527 10,358 9,484
Provision for doubtful accounts........................... 10,936 174 133 1,323 1,302
Deferred tax provision (benefit).......................... 2,297 (413) (51) 1,699 710
(Gain) on claims put agreement............................ (5,436) - - - -
(Gain) loss on sale or disposal of assets................. (3) 1 (7) 35 223
Compensation expense on stock option issuance............. - - - 93 -
Changes in assets and liabilities, net of effects of
acquisitions:
(Increase) decrease in accounts receivable.............. (5,052) 156,740 138,940 (13,377) 17,897
Decrease (increase) in inventories...................... 13,506 (28,140) (40,947) 10,884 17,616
(Increase) decrease in other assets..................... (10,483) (1,199) (332) 1,428 8,617
(Decrease) increase in accounts payable................. (8,762) 5,836 33 (3,278) (135)
Increase (decrease) in accrued taxes.................... 1,371 (10,516) (11,751) (222) (274)
Increase (decrease) in accrued expenses................. 13,535 (12,015) (14,910) (2,415) 4,820
-------- -------- -------- -------- --------
Total adjustments.................................... 23,554 113,123 73,635 6,528 60,260
-------- -------- -------- -------- --------
Net cash provided by operating activities............ 45,055 107,043 67,488 24,759 78,321
-------- -------- -------- ------- --------
Cash flows from investing activities:
Purchases of businesses, net of cash received of $295 in
2002 and $120 in1999...................................... (52,378) - - - (7,486)
Purchase of property, plant and equipment................... (10,007) (3,482) (2,586) (13,877) (14,858)
Proceeds from sale of assets................................ 4,251 - 37 56 70
-------- -------- -------- -------- --------
Net cash used for investing activities............... (58,134) (3,482) (2,549) (13,821) (22,274)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Payments on long-term obligations........................... (1,181) (317) (1,665) (2,706) (2,450)
Borrowings on long-term obligations......................... 170 - - 86 -
Borrowings (repayments) on notes payable.................... - (62,615) (62,370) 245 (32,950)
Purchase of treasury stock.................................. (9,409) - (3,819) (10,861) (21,505)
Proceeds from exercise of stock options..................... 1,829 - 64 64 1,936
-------- -------- -------- -------- --------
Net cash used for financing activities............... (8,591) (62,932) (67,790) (13,172) (54,969)
-------- -------- -------- -------- --------
Effect of exchange rate changes on cash........................ (11) - - - -
-------- -------- -------- -------- --------
Net (decrease) increase in cash and temporary investments...... (21,681) 40,629 (2,851) (2,234) 1,078
Cash and temporary investments at beginning of year............ 41,687 1,058 3,292 3,292 2,214
-------- -------- -------- -------- --------
Cash and temporary investments at end of year.................. $20,006 $41,687 $ 441 $ 1,058 $ 3,292
======== ======== ======== ======== ========

See notes to consolidated financial statements.

- 18 -

CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
(In thousands, except share amounts)

Preferred Stock Common Stock
--------------------------- ------------------------------
Shares Amount Shares Amount
------ ------ ------ ------

BALANCE, JANUARY 1, 1999 ................................. - $ - 12,366,566 $1,237
Tax benefit associated with exercise of
stock options.................................... - - - -
Issuance of common stock upon exercise of
stock options.................................... - - - -
Increase in treasury shares.......................... - - - -
Net income ........................................ - - - -
---------- ---------- ---------------- ---------

BALANCE, DECEMBER 31, 1999................................ - - 12,366,566 1,237
Issuance of common stock upon exercise of
stock options.................................... - - - -
Increase in treasury shares.......................... - - - -
Net income ........................................ - - - -
---------- ---------- ---------------- ----------

BALANCE, MARCH 31, 2000 (unaudited)....................... - - 12,366,566 1,237
Tax benefit associated with exercise of
stock options.................................... - - - -
Compensation expense on stock option issuance........ - - - -
Increase in treasury shares.......................... - - - -
Net income ........................................ - - - -
---------- ---------- ---------------- ----------

BALANCE, DECEMBER 31, 2000................................ - - 12,366,566 1,237
Change in fair value of interest rate swap
agreements, net.................................. - - - -
Net income ........................................ - - - -
---------- ---------- ------------------ ----------

BALANCE, MARCH 31, 2001................................... 12,366,566 1,237
Tax benefit associated with exercise of
stock options.................................... - - - -
Issuance of common stock upon exercise of
stock options.................................... - - - -
Increase in treasury shares.......................... - - - -
Change in fair value of interest rate swap
agreements, net.................................. - - - -
Foreign currency translation adjustment.............. - - - -
Net income ........................................ - - - -
---------- ---------- ---------------- ----------

BALANCE, MARCH 31, 2002................................... - $ - 12,366,566 $1,237
========== ========== ================ ==========

- 19 -

Accumulated Common Stock
Additional Other in Treasury
Paid-in Retained Comprehensive ----------------------------
Capital Earnings Income Shares Amount Total
--------- -------- ------------- ------ ------ -----

$28,866 $ 238,432 $ - (2,234,811) $(48,042) $220,493

492 - - - - 492

- (2,611) - 178,881 4,547 1,936
- - - (942,451) (21,505) (21,505)
- 18,061 - - - 18,061
-------- --------- ------------- ---------- -------- --------

29,358 253,882 - (2,998,381) (65,000) 219,477

- (53) - 5,535 117 64
- - - (193,000) (3,819) (3,819)
- (6,147) - - - (6,147)
-------- --------- ------------- ---------- -------- --------

29,358 247,682 - (3,185,846) (68,702) 209,575

87 - - - - 87
93 - - - - 93
- - - (350,200) (7,042) (7,042)
- 24,378 - - - 24,378
-------- --------- ------------- ---------- --------

29,538 272,060 - (3,536,046) (75,744) 227,091

- - (66) - - (66)
- (6,080) - - (6,080)
-------- --------- ------------- ---------- -------- --------

29,538 265,980 (66) (3,536,046) (75,744) 220,945

187 - - - - 187

- 34 - 81,949 1,794 1,828
- - - (327,000) (9,409) (9,409)

- - (196) - - (196)
- - (11) - - (11)
- 21,501 - - - 21,501
-------- --------- ------------- ---------- -------- --------
$ 29,725 $287,515 $ (273) (3,781,097) $(83,359) $234,845
======== ========= ============= ========== ======== ========

- 20 -

CSS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The consolidated financial statements include the accounts of CSS
Industries, Inc. ("Company") and all subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation. Translation
adjustments are charged or credited to a separate component of stockholders'
equity. Gains and losses on foreign currency transactions are not material and
are included in rental and other expense in the consolidated statements of
operations.

Nature of Business

CSS Industries, Inc. ("CSS" or the "Company") is a consumer products
company primarily engaged in the design, 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, Easter egg dyes and novelties
and educational products. CSS provides its retail customers the opportunity to
use a single vendor for much of their seasonal product requirements. CSS'
product breadth, product innovation, creative design, manufacturing and
packaging flexibility, product quality and customer service are key to
sustaining the Company's market leadership position. A substantial portion of
CSS' products are manufactured, packaged and warehoused in twenty-one North
American facilities, with the remainder purchased primarily from Asian
manufacturers. The Company's products are sold to its retail customers by
national and regional account managers and product specialists and by a network
of independent manufacturers' representatives. The Company is comprised of The
Paper Magic Group, Inc. ("Paper Magic"), acquired by the Company in August 1988,
Berwick Industries LLC ("Berwick"), acquired in May 1993, and Cleo Inc ("Cleo"),
acquired in November 1995. During March 2002, Berwick completed the acquisition
of substantially all of the business and assets of the portion of C. M. Offray &
Son, Inc. ("Offray") which manufactures and sells decorative ribbon products,
floral accessories and narrow fabrics for apparel, craft and packaging
applications. Subsequent to the acquisition, Berwick changed its name to Berwick
Offray LLC.

Change in Fiscal Year

On February 21, 2001, CSS' Board of Directors approved a change in the
Company's fiscal year end from December 31 to March 31. The transition period
began January 1, 2001 and ended March 31, 2001. The Company's new fiscal year
began April 1, 2001 and ended March 31, 2002. With this change, the Company's
new fiscal year will coincide with its natural revenue cycle.

Reclassification

Certain prior-period amounts have been reclassified to conform with
current-year classification.

Use of Estimates

- 21 -

Inventories

The Company records inventory at the date of taking title which generally
occurs upon receipt or prior to shipment of in-transit inventory of overseas
product. The Company adjusts unsalable and slow-moving inventory to its net
realizable value. Substantially all of the Company's inventories are stated at
the lower of first-in, first-out (FIFO) cost or market. The remaining portion of
the inventory is valued at the lower of last-in, first-out cost or market. Had
all inventories been valued at the lower of FIFO cost or market, inventories
would have been greater by $1,147,000 and $1,180,000 at March 31, 2002 and 2001,
respectively. Inventories consisted of the following:

(in thousands) 2002 2001
-------- ---------

Raw material $25,196 $17,795
Work-in-process 28,612 30,375
Finished goods 44,733 33,970
-------- -------
$98,541 $82,140
======= =======

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation and
amortization are provided generally on the straight-line method and are based on
estimated useful lives or terms of leases as follows:

Buildings, leasehold interests and improvements................. Lease term to 40 years
Machinery, equipment and other.................................. 3 to 12 years

When property is retired or otherwise disposed of, the related cost and
accumulated depreciation and amortization are eliminated from the accounts. Any
gain or loss from the disposition of property, plant and equipment is included
in other income. Maintenance and repairs are expensed as incurred while
improvements are capitalized and depreciated over their estimated useful lives.

Intangible Assets

Intangible assets, including goodwill, are amortized over terms from five
to forty years.

Long Lived Assets

The Company periodically evaluates the net realizable value of long lived
assets, including goodwill and other intangible assets and property, plant and
equipment, relying on a number of factors including operating results, business
plans, economic projections and anticipated future cash flows. An impairment in
the carrying value of an asset is assessed when the undiscounted, expected
future operating cash flows derived from the asset are less than its carrying
value.

Derivative Financial Instruments

The Company uses certain derivative financial instruments as part of its
risk management strategy to reduce interest rate and currency risk. Derivatives
are not used for trading or speculative activities. The Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities - an amendment of
FASB Statement No. 133," on January 1, 2001. The adoption of SFAS No. 133 was
not material to the consolidated statements of operations or financial position
of the Company.

- 22 -

The Company recognizes all derivatives on the balance sheet at fair value.
On the date the derivative instrument is entered into, the Company generally
designates the derivative as either (1) a hedge of the fair value of a
recognized asset or liability or of an unrecognized firm commitment ("fair value
hedge"), or (2) a hedge of a forecasted transaction or of the variability of
cash flows to be received or paid related to a recognized asset or liability
("cash flow hedge"). Changes in the fair value of a derivative that is
designated as, and meets all the required criteria for, a fair value hedge,
along with the gain or loss on the hedged asset or liability that is
attributable to the hedged risk, are recorded in current period earnings.
Changes in the fair value of a derivative that is designated as, and meets all
the required criteria for, a cash flow hedge are recorded in accumulated other
comprehensive income and reclassified into earnings as the underlying hedged
item affects earnings. The portion of the change in fair value of a derivative
associated with hedge ineffectiveness or the component of a derivative
instrument excluded from the assessment of hedge effectiveness is recorded
currently in earnings. Also, changes in the entire fair value of a derivative
that is not designated as a hedge are recorded immediately in earnings. The
company formally documents all relationships between hedging instruments and
hedged items, as well as its risk-management objective and strategy for
undertaking various hedge transactions. This process includes relating all
derivatives that are designated as fair value or cash flow hedges to specific
assets and liabilities on the balance sheet or to specific firm commitments or
forecasted transactions.

The Company also formally assesses, both at the inception of the hedge and
on an ongoing basis, whether each derivative is highly effective in offsetting
changes in fair values or cash flows of the hedged item. If it is determined
that a derivative is not highly effective as a hedge or if a derivative ceases
to be a highly effective hedge, the Company will discontinue hedge accounting
prospectively.

The Company enters into foreign currency contracts in order to reduce the
impact of certain foreign currency fluctuations. Firmly committed transactions
and the related receivables and payables may be hedged with forward exchange
contracts. Gains and losses arising from foreign currency forward contracts are
recognized in income or expense as offsets of gains and losses resulting from
the underlying hedged transactions. The notional amount of open forward exchange
contracts as of March 31, 2002 and 2001 was $26,000 and $1,630,000,
respectively, and the related gains and losses were not material.

During 2001, the Company entered into interest rate swap agreements, with
maturities through January 2004, to manage its exposure to interest rate
movements by effectively converting a portion of its anticipated working capital
debt from variable to fixed rates. The average annual notional amounts of
interest rate swap contracts subject to fixed rates were $32,838,000,
$21,890,000 and $10,946,000 for fiscal years 2002, 2003 and 2004, respectively.
These agreements involve the exchange of variable rate payments for fixed rate
payments without the effect of leverage and without the exchange of the
underlying face amount. Fixed interest rate payments are at a weighted average
rate of 4.82%, 4.96% and 5.09% for fiscal years 2002, 2003 and 2004,
respectively. Variable rate payments are based on one month U.S. dollar LIBOR.
Interest rate differentials paid or received under these agreements are
recognized as adjustments to interest expense.

The fair value of interest rate swap agreements is included in other
current liabilities and totaled $262,000 and $66,000 as of March 31, 2002 and
2001, respectively.

Income Taxes

The Company follows the liability method of accounting for deferred income
taxes. Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities. Deferred tax assets or liabilities at the end of each period are
determined using the tax rate expected to be in effect when taxes are actually
paid or recovered.

- 23 -

Revenue Recognition

The Company recognizes revenue from product sales when the goods are
shipped and the title and risk of loss pass to the customer. Provisions for
allowances and rebates to customers, returns and other adjustments are provided
in the same period that the related sales are recorded.

Product Development Costs

Product development costs consist of purchases of outside artwork, printing
plates and cylinders. The Company classifies these costs as prepaid. They are
amortized monthly over the selling season and recorded in selling, general and
administrative expense.

Shipping and Handling Fees and Costs

Shipping and handling fees and costs are reported in cost of sales in the
consolidated statements of operations.

Net Income (Loss) Per Common Share

The following table sets forth the computation of basic earnings per share
and diluted earnings per share for the year ended March 31, 2002, for the three
month period ended March 31, 2001 and for the years ended December 31, 2000 and
1999:

(in thousands, except per share amounts)

For the Years
For the Year For the Three Month Ended
Ended Period Ended December 31
March 31, March 31, ---------------------
2002 2001 2000 1999
-------------- -------------- ------- -------

Numerator:
Net income (loss).................................. $21,501 $(6,080) $18,231 $18,061

Denominator:
Weighted average shares outstanding for
basic earnings per share....................... 8,827 8,831 9,037 9,747

Effect of dilutive stock options................... 145 - 4 48
------- -------

Adjusted weighted average shares outstanding
for diluted earnings per share................. 8,972 8,831 9,041 9,795
===== ===== ===== =====

Basic earnings (loss) per share......................... $2.44 $(.69) $2.02 $1.85
===== ===== ===== =====

Diluted earnings (loss) per share....................... $2.40 $(.69) $2.02 $1.84
===== ===== ===== =====

Options on 480,000 shares, 633,000 shares and 1,162,000 shares of common
stock were not included in computing diluted earnings per share for the year
ended March 31, 2002 and for the years ended December 31, 2000 and 1999,
respectively, because their effects were antidilutive. Options on 1,589,000
shares were not included in computing diluted earnings per share for the three
months ended March 31, 2001because their effects were antidilutive due to the
Company's loss during the period.

- 24 -

Statements of Cash Flows

For purposes of the consolidated statements of cash flows, the Company
considers all holdings of highly liquid debt instruments with original maturity
of less than three months to be temporary investments.

Supplemental Schedule of Cash Flow Information

(In thousands)

For the Year For the Three Month For the Years Ended
Ended Period Ended December 31,
March 31, March 31, ----------------------
2002 2001 2000 1999
-------------- --------- ---- --------

Cash paid during the year for:
Interest............................. $ 2,139 $ 917 $5,290 $ 4,533
======= ====== ====== =======

Income taxes......................... $10,705 $9,053 $9,120 $10,258
======= ====== ====== =======

Details of acquisitions:
Fair value of assets acquired........ $64,499 - - $ 9,739
Liabilities assumed.................. 11,826 - - 2,133
------- ------ ------ -------
Cash paid............................ 52,673 - - 7,606
Less cash acquired................... 295 - - 120
------- ------ ------ -------
Net cash paid for acquisitions............ $52,378 $ - $ - $ 7,486
======= ====== ====== =======

See Note 2 for supplemental disclosure of non-cash investing activities.

(2) BUSINESS ACQUISITIONS AND DIVESTITURES:

On March 15, 2002, a subsidiary of the Company completed the acquisition of
substantially all of the business and assets of the portion of C. M. Offray &
Son, Inc. which manufactures and sells decorative ribbon products, floral
accessories and narrow fabrics for apparel, craft and packaging applications.
Berwick acquired substantially all of the business and assets of Offray for
approximately $44,800,000 in cash (paid from cash on hand). The purchase price
is subject to a post-closing adjustment depending upon Offray's working capital
on the date of the closing. A portion of the purchase price is being held in
escrow to cover purchase price adjustments and indemnification obligations. The
acquisition was accounted for as a purchase and the cost approximated the fair
market value of the net assets acquired.

In conjunction with the acquisition of Offray, the Company's management
approved a restructuring plan. As part of this plan, the Company accrued
$4,541,000 on the day of acquisition for severance and costs related to the
closure of certain facilities.

- 25 -

The unaudited consolidated results of operations of the Company and Offray
on a pro forma basis as though the transaction had been consummated at the
beginning of the respective years were as follows:

Year Ended Year Ended
March 31, 2002 December 31, 2000
-------------- -----------------

Sales $523,141 $516,452
Net income 21,889 18,527
Net income per common share
Basic $2.48 $2.05
Diluted $2.44 $2.05

Pro forma adjustments included in the above reflect the effect of purchase
accounting adjustments on interest, depreciation, amortization and tax expense.

On August 18, 1999, the Company acquired certain assets and the business of
Party Professionals, Inc. Party Professionals designed and marketed highly
crafted latex masks, helmets and accessories sold to mass merchandisers, drug
chains, party stores and gift shops. In consideration, the Company paid
$6,000,000 in cash and assumed and repaid $1,606,000 of outstanding debt. The
acquisition was accounted for as a purchase and the excess of cost over fair
market value of $6,697,000 was recorded as goodwill in the accompanying balance
sheet and until the adoption of SFAS No. 142 on April 1, 2002 was being
amortized over twenty years. As of December 31, 1999, the operations of Party
Professionals, now known as Don Post Studios, Inc., were consolidated into
existing operations of the Company.

(3) TREASURY STOCK TRANSACTIONS:

On February 19, 1998, the Company announced that its Board of Directors had
authorized the buyback of up to 1,000,000 shares of the Company's Common Stock.
Subsequently, the Board of Directors authorized repurchases of an additional
2,000,000 shares on terms acceptable to management. The Company repurchased
327,000 shares for $9,409,000, in the fiscal year ended March 31, 2002, 543,200
shares for $10,861,000 in calendar 2000 and 942,451 shares for $21,505,000 in
calendar 1999. There were no stock repurchases for the three month transition
period ended March 31, 2001.

(4) STOCK OPTION PLANS:

Under the terms of the CSS Industries, Inc. 2000 Stock Option Plan for
Non-Employee Directors ("2000 Plan"), non-qualified stock options to purchase up
to 200,000 shares of common stock are available for grant to non-employee
directors at exercise prices of not less than fair market value on the date of
grant. Options to purchase 4,000 shares of the Company's common stock are to be
granted automatically to each non-employee director on the last day that the
Company's common stock is traded in November from 2001 to 2005. Each option will
expire ten years after the date the option is granted and options may be
exercised at the rate of 25% per year commencing one year after the date of
grant. At March 31, 2002, options to acquire 180,000 shares were available for
grant under the 2000 Plan.

- 26 -

Under the terms of the 1994 Equity Compensation Plan ("1994 Plan"), the
Human Resources Committee ("Committee") of the Board of Directors may grant
incentive stock options, non-qualified stock options, restricted stock grants,
stock appreciation rights or combinations thereof to officers and other key
employees. Grants under the 1994 Plan may be made through November 2004 and are
exercisable at the discretion of the Committee but in no event greater than ten
years from the date of grant. Options may be exercised at the rate of 25% per
year commencing one year after the date of grant. At March 31, 2002, options to
acquire 5,810 shares were available for grant under the 1994 Plan. On February
5, 2002, 108,500 shares were approved for grant by the Human Resources
Committee, but with the concurrence of the grantees thereof, these grants are
subject to stockholder approval of the Plan Amendment to increase eligible
shares.

On May 17, 2000 the Committee authorized the amendment of the option
exercise period of each grant that would have otherwise expired on or before
January 31, 2001 to extend such period for two years, and on November 3, 2000
further authorized the amendment of the option exercise period of each grant
(including those option exercise periods extended on May 17, 2000) to ten years
from the respective date of each such grant. The Company recorded compensation
expense of $93,000 as a result of these amendments which represented the
difference between the market value of the shares and the exercise price on the
date of the amendments.

The CSS Industries, Inc. 1995 Stock Option Plan for Non-Employee Directors
("1995 Plan"), under which non-qualified stock options to purchase up to 300,000
shares of common stock were available for grant to non-employee directors at
exercise prices of not less than fair market value on the date of grant, expired
on December 31, 2000. Options to purchase 4,000 shares of the Company's common
stock were to be granted automatically to each non-employee director on the last
day of November through the year 2000. Options may be exercised at the rate of
25% per year commencing one year after the date of grant. At December 31, 2000,
options to acquire 204,000 shares expired under the 1995 Plan.

The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations in accounting for
its plans. Accordingly, compensation expense is generally not recognized for its
stock-based compensation plans. Had compensation expense for the Company's stock
option plans been determined based upon the fair value at the grant date for
awards under these plans consistent with the methodology prescribed under SFAS
No. 123, "Accounting for Stock-Based Compensation", the Company's net income and
earnings per share would have been reduced as follows:

For the Years Ended
For the Year For the Three Month December 31,
Ended Period Ended -------------------
March 31, 2002 March 31, 2001 2000 1999
-------------- -------------------- ---- ----

(in thousands, except per share values)

Net income (loss) - as reported....................... $21,501 $(6,080) $18,231 $18,061
Net income (loss) - pro forma......................... 19,009 (6,761) 15,863 15,705

Basic net income (loss) per share - as reported....... $2.44 $(.69) $2.02 $1.85
Basic net income (loss) per share - pro forma......... $2.15 $(.77) $1.76 $1.61

Diluted net income (loss) per share - as reported..... $2.40 $(.69) $2.02 $1.84
Diluted net income (loss) per share - pro forma....... $2.12 $(.77) $1.75 $1.60

- 27 -

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions:

For the Years Ended
For the Year For the Three Month December 31,
Ended Period Ended ---------------------
March 31, 2002 March 31, 2001 2000 1999
-------------- -------------------- ---- ----

Expected dividend yield......................... 0% 0% 0% 0%
Expected stock price volatility................. 44% 43% 42% 39%
Risk-free interest rate......................... 5.28% 5.50% 5.66% 5.60%
Expected life of option......................... 9.9 years 8.5 years 6.7 years 3.6 years

Transactions from January 1, 1999 through March 31, 2002, under the above
plans were as follows:

Weighted Weighted
Number Option Price Average Average Life
of Shares per Share Price Remaining
--------- ------------ -------- -------------

Options outstanding at January 1, 1999.............. 1,246,575 $16.00 - $33.94 $22.90 2.2 years
Granted........................................ 423,100 21.28 - 28.63 26.97
Exercised...................................... (315,380) 16.00 - 25.88 18.06
Canceled....................................... (346,911) 16.00 - 33.94 27.83
--------- --------------- ------
Options outstanding at December 31, 1999............ 1,007,384 16.00 - 33.13 25.26 2.8 years
Granted........................................ 373,900 19.06 - 21.50 21.20
Exercised...................................... (10,000) 16.00 - 16.00 16.00
Canceled....................................... (114,200) 20.13 - 33.00 23.77
--------- --------------- ------
Options outstanding at December 31, 2000............ 1,257,084 17.13 - 33.13 24.26 7.1 years
Granted........................................ 348,100 20.38 - 21.50 21.49
Exercised...................................... - - -
Canceled....................................... (2,000) 21.50 21.50
--------- --------------- ------
Options outstanding at March 31, 2001............... 1,603,184 17.13 - 33.13 23.66 7.3 years
Granted........................................ 353,100 24.41 - 31.70 25.58
Exercised...................................... (81,949) 18.63 - 28.63 22.31
Canceled....................................... (60,826) 20.13 - 28.63 23.26
--------- --------------- ------
Options outstanding at March 31, 2002............... 1,813,509 $ 17.13 - 33.13 $24.11 7.2 years
========= =============== ======

Options exercisable at March 31, 2002............... 902,574 $ 17.13 - 33.13 $24.43
========= =============== ======

- 28 -

The following table summarizes information concerning currently outstanding
and exercisable options:

Options Outstanding Options Exercisable
-------------------------------------------------------------------- ------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
----------- ----------- ----------- ---------- ----------- --------

$16.97 - $20.36 87,234 5.0 $18.90 50,734 $18.55
$20.36 - $23.76 761,625 7.4 $21.40 358,675 $21.27
$23.76 - $27.15 642,800 7.7 $25.69 257,000 $26.09
$27.15 - $30.54 287,850 6.4 $28.34 215,165 $28.25
$30.54 - $33.94 34,000 4.9 $32.51 21,000 $33.03
--------- --- ------ ------- ------
1,813,509 7.2 $24.11 902,574 $24.43
========= === ====== ======= ======

(5) PROFIT SHARING PLANS:

The Company maintains defined contribution profit sharing and 401(k) plans
covering substantially all of its employees as of March 31, 2002. Annual
contributions under the plans are determined by the Board of Directors of the
Company or each subsidiary, as appropriate. Consolidated expense related to the
plans for the year ended March 31, 2002, the three month period ended March 31,
2001 and the years ended December 31, 2000 and 1999 was $1,997,000, $579,000,
$2,145,000 and $2,230,000, respectively.

(6) FEDERAL INCOME TAXES:

The following table summarizes the provision for U.S. federal, state and
foreign taxes on income:

For the Years Ended
For the Year For the Three Month December 31,
Ended Period Ended ---------------------
March 31, 2002 March 31, 2001 2000 1999
-------------- -------------------- ---- ----

(in thousands)
Current:
Federal.................................... $8,336 $(2,847) $ 7,412 $ 8,817
State...................................... 38 28 130 56
Foreign.................................... 1,283 118 934 798
------- ------- ------- -------
9,657 (2,701) 8,476 9,671
------- ------- ------- -------
Deferred:
Federal.................................... 2,220 (406) 1,699 723
State...................................... 77 (7) - (13)
Foreign.................................... - - - -
------- ------- ------- -------
2,297 (413) 1,699 710
------- ------- ------- -------
$11,954 $(3,114) $10,175 $10,381
======= ======= ======= =======

- 29 -

The differences between the statutory and effective federal income tax
rates on income before income taxes were as follows:

For the Years Ended
For the Year For the Three Month December 31,
Ended Period Ended --------------------
March 31, 2002 March 31, 2001 2000 1999
-------------- -------------------- ---- ----

U.S. federal statutory rate..................... 35.0% (35.0)% 35.0% 35.0%
State income taxes, less federal benefit........ .2 .1 .3 .1
Non-deductible goodwill......................... .8 .7 1.0 1.0
Other........................................... (.3) .3 (.5) .4
---- ----- ---- ----
35.7% (33.9)% 35.8% 36.5%
==== ===== ==== ====

Deferred taxes are recorded based upon differences between the financial
statement and tax bases of assets and liabilities and available tax credit
carryforwards. The following temporary differences gave rise to net deferred
income tax (liabilities)/assets as of March 31, 2002 and 2001:

March 31,
(in thousands) 2002 2001
---- ----

Deferred income tax assets:
Accounts receivable...................................... $ 662 $ 848
Inventories.............................................. 2,632 2,614
Accrued expenses......................................... 3,929 2,915
State net operating loss carryforward.................... 6,080 5,895
Other.................................................... 399 1,324
------- -------
13,702 13,596
Valuation allowance (6,080) (5,895)
------- -------
7,622 7,701
------- -------

Deferred income tax liabilities:
Property, plant and equipment............................ 5,181 3,034
Unremitted earnings of foreign subsidiaries.............. 1,013 1,032
Other.................................................... 4,261 4,171
------- -------
10,455 8,237
------- -------
Net deferred income tax liability........................ $(2,833) $ (536)
======= =======

At March 31, 2002 and 2001, the Company had net operating loss
carryforwards for state income tax purposes of $86,966,000 and $85,919,000,
respectively, that expire in various years through 2017. For financial reporting
purposes, valuation allowances have been established to offset these deferred
tax assets as it is more likely than not that the net operating loss
carryforwards will not be realized prior to expiration.

- 30 -

(7) LONG-TERM DEBT AND CREDIT ARRANGEMENTS:

Long-term debt consisted of the following:

March 31,
---------------------
(in thousands) 2002 2001
---- ----

Mortgages, payable monthly through 2001, interest at rates
ranging from 6% to 10.5%.......................................... $ - $ 56
Industrial Development Revenue Bonds, payable periodically
through 2001, interest at rates ranging from 4% to 4.5%........... - 19
Other ............................................................. 365 430
---- -----
365 505
Less - current portion................................................ (200) (312)
----- ------
$165 $193
==== ====

The Company entered into a $300,000,000 unsecured revolving credit facility
with thirteen banks and financial institutions on July 21, 1997. The facility
allowed for borrowings up to $300,000,000 and expired on April 30, 2001. On
April 30, 2001, the Company replaced its expiring revolving credit facility with
two new financing facilities. The Company entered into a $75,000,000 unsecured
revolving credit facility with five banks. This facility allows for borrowings
up to $75,000,000, expires on April 30, 2004 and provides that borrowings are
limited during a consecutive 30 day period in each year of the agreement. The
loan agreement contains provisions to increase or reduce the interest pricing
spread based on the achievement of certain benchmarks related to the ratio of
earnings to interest expense. At the Company's option, interest on the facility
currently accrues at (1) the greater of the prime rate minus 0.5% or the Federal
Funds Rate, or (2) LIBOR plus 1%. The revolving credit facility provides for
commitment fees of 0.25% per annum on the daily average of the unused
commitment. The loan agreement also contains covenants, the most restrictive of
which pertain to net worth; the ratio of operating cash flow to fixed charges;
the ratio of earnings to interest expense and the ratio of debt to
capitalization. The Company is in compliance with all financial debt covenants.

The Company also entered into a receivables purchase agreement with an
issuer of receivables-backed commercial paper. Under this arrangement, the
Company sells, on an ongoing basis and without recourse, its trade accounts
receivable to a wholly-owned special purpose subsidiary (the "SPS"), which in
turn has the option to sell, on an ongoing basis and without recourse, to the
commercial paper issuer an undivided percentage interest in the pool of accounts
receivable. Under the agreement, new trade receivables are automatically sold to
the SPS and become a part of the receivables pool. The agreement permits the
sale (and repurchase) of an undivided interest in the accounts receivable pool
for an amount of up to $100,000,000 through April 30, 2004, subject to an annual
renewal. Interest on amounts financed under this facility is based on a variable
commercial paper rate plus 0.375%. The receivables facility provides for
commitment fees of 0.225% per annum on the daily average of the unused
commitment. This arrangement has been accounted for as a financing transaction.

The weighted average interest rate under these loan agreements for the year
ended March 31, 2002, the three months ended March 31, 2001 and the years ended
December 31, 2000 and 1999 was 4.48%, 3.20%, 7.37% and 6.24%, respectively. The
average and peak borrowings were $32,670,000 and $101,800,000 for the year ended
March 31, 2002 and $59,465,000 and $133,090,000 for the year ended March 31,
2001. Additionally, outstanding letters of credit totaled $4,883,000 and
$3,938,000 at March 31, 2002 and 2001, respectively. The Company has letters of
credit that guarantee funding of workers compensation claims as well as
obligations to certain vendors.

The Company maintained various notes related to the financing of
manufacturing facilities which were paid in full in 2001. The Company also
maintained second mortgages on several facilities financed with Industrial
Development Revenue Bonds. All such bonds matured in 2001.

- 31 -

Long-term debt matures as follows:

(in thousands)

2003................................................... $200
2004................................................... 103
2005................................................... 62
-----
Total............................................... $365
====

(8) OPERATING LEASES:

The future minimum rental payments associated with all noncancelable lease
obligations are as follows:

(in thousands)

2003................................................... $ 6,011
2004................................................... 4,641
2005................................................... 3,293
2006................................................... 2,342
2007................................................... 651
Thereafter............................................. 404
-------
Total.............................................. $17,342
=======

Rent expense was $6,660,000, $1,700,000, $7,368,000 and $6,971,000 in the
year ended March 31, 2002, in the three month period ended March 31, 2001 and in
the years ended December 31, 2000 and 1999, respectively.

(9) CLAIMS PUT AGREEMENT:

The Company entered into a Claims Put Agreement (the Put Agreement) on
January 16, 2002 with an unrelated financial institution giving CSS the ability
to put Kmart trade receivables, not to exceed $16,000,000, arising from
merchandise delivered during the period September 15, 2001 through the date of a
bankruptcy event. CSS paid a premium of $480,000 to enter into this agreement.
The Kmart put option was exercisable if Kmart filed for bankruptcy. On January
22, 2002, Kmart filed for bankruptcy under Chapter XI of the U.S. Bankruptcy
Code. On February 21, 2002, the Company exercised the put option giving CSS the
right to collect an amount equal to the pre-petition receivables balance
outstanding with Kmart, times the purchase rate, or 70%.

During the fiscal year, the Company adopted a policy for classifying gains
on these types of credit risk arrangements in selling, general and
administrative expenses (SG&A). For the year ended March 31, 2002, the Company
recognized a pre-tax gain of approximately $5,436,000 for the change in the Put
Agreement's value, less the premium paid. This amount was offset by bad debt
expense of approximately $10,352,000 and was recorded in SG&A in the
consolidated statement of operations.

As of March 31, 2002, the fair market value of Kmart receivables not yet
assigned to the financial institution and the value of the Kmart put right were
approximately $4,436,000 and $5,916,000, respectively, and were classified as
other current assets in the consolidated balance sheet.

(10) FAIR VALUE OF FINANCIAL INSTRUMENTS:

The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate methodologies.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Company could realize in a current market exchange. Certain
of these financial instruments are with major financial institutions and expose
the Company to market and credit risks and may at times be concentrated with
certain counterparties or groups of counterparties. The creditworthiness of
counterparties is continually reviewed, and full performance is anticipated.

- 32 -

The methods and assumptions used to estimate the fair value of each class
of financial instruments are set forth below:

o Cash and temporary investments, accounts receivable and accounts
payable - The carrying amounts of these items are a reasonable estimate
of their fair values at March 31, 2002 and 2001.

o Short-term borrowings - Borrowings under the revolving credit facility
have variable rates that reflect currently available terms and
conditions for similar debt. The carrying amount of this debt is a
reasonable estimate of its fair value.

o Other long-term obligations - The carrying amounts of these items are a
reasonable estimate of their fair value.

o Foreign currency contracts - The fair value is based on quotes obtained
from financial institutions. As of March 31, 2002 and 2001, the fair
value of foreign currency contracts was immaterial.

o Interest rate swap agreements - The fair value is based on quotes
obtained from financial institutions. The fair value of interest rate
swap agreements at March 31, 2002 and 2001 was $262,000 and $66,000,
respectively.

(11) COMMITMENTS AND CONTINGENCIES:

The Company is subject to various lawsuits and claims arising out of the
normal course of business. In the opinion of Company counsel and management, the
ultimate liabilities resulting from such lawsuits and claims will not materially
affect the consolidated financial position of the Company.

In February 1999, CSS was awarded and received approximately $11,200,000,
including interest, in settlement of a dispute primarily related to the
valuation of inventory acquired in the 1995 acquisition of Cleo Inc. The award
had no impact on 1999 results of operations.

(12) SEGMENT DISCLOSURE:

The Company operates in a single segment, the manufacture, distribution and
sale of non-durable seasonal consumer goods, primarily to mass market retailers.
CSS conducts substantially all of its business in the United States.

The Company's detail of revenues from its various products is as follows:

(in thousands)

For the Three For the Years Ended
For the Year Month Period December 31,
Ended Ended -----------------------
March 31, 2002 March 31, 2001 2000 1999
-------------- -------------- ---- ----

Christmas $288,325 $ 3,157 $280,587 $266,766
Everyday 50,294 8,785 51,223 51,598
Halloween/Easter 58,864 12,319 63,137 61,974
Other 26,826 2,726 26,137 28,529
-------- ------- -------- --------
Total $424,309 $26,987 $421,084 $408,867
======== ======= ======== ========

One customer accounted for sales of $87,975,000, or 20.7% of total sales
and one customer accounted for sales of $45,030,000, or 10.6% of total sales in
the year ended March 31, 2002. One customer accounted for sales of $4,021,000,
or 15% of total sales in the three month period ended March 31, 2001,
$92,141,000, or 21.9% of total sales in the year ended December 31, 2000 and
$85,591,000 or 20.9% in the year ended December 31, 1999.

- 33 -

(13) QUARTERLY FINANCIAL DATA (UNAUDITED):

(In thousands, except per share amounts)

2002 Quarters
---- --------------------------------------------
First Second Third Fourth
------- --------- ---------- --------

Net sales ................................................ $28,817 $ 134,383 $ 235,944 $ 25,165
------- --------- ---------- --------

Gross profit ............................................. 8,153 35,661 65,745 5,341
------- --------- ---------- --------

Net (loss) income ........................................ $(4,324) $ 8,606 $ 23,059 $ (5,840)
======= ========= ========== ========

Net (loss) income per common share:
Basic- ............................................... $ (.49) $ .97 $ 2.60 $ (.67)
======= ========= ========== ========

Diluted- ............................................ $ (.49) $ .96 $ 2.54 $ (.67)
======= ========= ========== ========

2001 Quarters
---- --------------------------------------------
First Second Third Fourth
------- --------- ---------- --------

Net sales ................................................ $38,194 $ 148,261 $ 208,914 $ 26,987
------- --------- ---------- --------

Gross profit ............................................. 9,837 34,710 57,001 7,024
------- --------- ---------- --------

Net (loss) income ........................................ $(4,057) $ 7,296 $ 21,139 $ (6,080)
======= ========= ========== ========

Net (loss) income per common share:
Basic- ............................................... $ (.45) $ .81 $ 2.39 $ (.69)
======= ========= ========== ========

Diluted- ............................................ $ (.45) $ .81 $ 2.39 $ (.69)
======= ========= ========== ========

(14) ACCOUNTING PRONOUNCEMENTS:

- 34 -

- 35 -

Part III

Item 10. Directors and Executive Officers of the Registrant

See "ELECTION OF DIRECTORS" and "OUR EXECUTIVE OFFICERS" in the Proxy
Statement for the 2002 Annual Meeting of Stockholders of the Company, which will
be incorporated herein by reference.

Item 11. Executive Compensation

See "EXECUTIVE COMPENSATION" in the Proxy Statement for the 2002 Annual
Meeting of Stockholders of the Company, which will be incorporated herein by
reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

See "CSS SECURITY OWNERSHIP" in the Proxy Statement for the 2002 Annual
Meeting of Stockholders of the Company, which will be incorporated herein by
reference.

Item 13. Certain Relationships and Related Transactions

See "CERTAIN TRANSACTIONS" in the Proxy Statement for the 2002 Annual
Meeting of Stockholders of the Company, which will be incorporated herein by
reference.

Part IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) Attached hereto and filed as part of this report are the financial
statement schedules and the exhibits listed below:

1. Financial Statements
--------------------

Report of Independent Public Accountants

Consolidated Balance Sheets - March 31, 2002 and 2001

Consolidated Statements of Operations - for the year ended March 31,
2002, for the three month periods ended March 31, 2001 and 2000 and for
the years ended December 31, 2000 and 1999

Consolidated Statements of Cash Flows - for the year ended March 31,
2002, for the three month periods ended March 31, 2001 and 2000 and for
the years ended December 31, 2000 and 1999

Consolidated Statements of Stockholders' Equity - for the year ended
March 31, 2002, for the three month periods ended March 31, 2001 and
2000 and for the years ended December 31, 2000 and 1999

Notes to Consolidated Financial Statements

2. Financial Statement Schedules
-----------------------------

Schedule II - Valuation and Qualifying Accounts

(b) Reports on Form 8-K filed during the last quarter of fiscal 2002
----------------------------------------------------------------

- 36 -

The Company filed a report on Form 8-K dated March 15, 2002 with
respect to the acquisition of C. M. Offray & Son, Inc.

(c) Exhibits, Including Those Incorporated by Reference The following is
a list of exhibits filed as part of this annual report on Form 10-K.
Where so indicated by footnote, exhibits which were previously filed
are incorporated by reference. For exhibits incorporated by reference,
the location of the exhibit in the previous filing is indicated in
parentheses.

Articles of Incorporation and By-laws
-------------------------------------

3.1 Restated Certificate of Incorporation filed December 5, 1990. (1)
(Exhibit 3.1)

3.2 Amendment to Restated Certificate of Incorporation filed May 8,
1992. (2) (Exhibit 3.2)

3.3 Certificate eliminating Class 2, Series A, $1.35 Preferred stock
filed September 27, 1991. (3) (Exhibit 3.2)

3.4 Certificate eliminating Class 1, Series B, Convertible Preferred
Stock filed January 28, 1993. (2) (Exhibit 3.5)

3.5 By-laws of the Company, as amended to date (as last amended
February 21, 2001). (11) (Exhibit 3.6)

Material Contracts
------------------

10.1 CSS Industries, Inc. 1995 Stock Option Plan for Non-Employee
Directors. (7) (Exhibit 10.2)

10.2 Loan Agreement among CSS Industries, Inc., the Lending
Institutions listed therein, CoreStates Bank, N.A. as the
Administrative Agent, and Merrill Lynch & Co. as the Syndication
Agent, dated as of July 21, 1997. (8) (Exhibit 10.4)

10.3 Settlement Agreement dated January 1, 2000 between Berwick
Industries LLC and Henry T. Doherty (10) (Exhibit 10.6)

10.4 Asset Purchase Agreement, dated February 8, 2002, among Berwick
Industries, LLC, Daylight Acquisition Corp., Lion Ribbon Company,
Inc., C. M. Offray & Son, Inc., CVO Corporation (Delaware), C.M.
Offray & Son (Hong Kong) Limited, Claude V. Offray, Jr., Claude V.
Offray III, and Denise A. Offray. (12) (Exhibit 2.1)

10.5 Amendment No. 1 to Asset Purchase Agreement dated March 15, 2002.
(12) (Exhibit 2.2)

*10.6 Interest Rate Swap Master Agreement dated as of March 19, 2001
between First Union National Bank and CSS Industries, Inc.

*10.7 Interest Rate Swap Master Agreement dated as of April 2, 2001
between PNC Bank, National Association and CSS Industries, Inc.

*10.8 Loan Agreement among CSS Industries, Inc., the Lending
Institutions listed therein, PNC Bank, National Association as the
Administrative Agent, PNC Capital Markets, Inc. as Lead Arranger
and Fleet National Bank and First Union National Bank as
Co-Documentation Agents, dated as of April 30, 2001.

*10.9 Receivables Purchase Agreement among CSS Funding LLC, CSS
Industries, Inc., Market Street Funding Corporation and PNC Bank,
National Association, dated as of April 30, 2001.

*10.10 Purchase and Sale Agreement between Various Entities Listed on
Schedule I, as the Originators, CSS Industries, Inc. and CSS
Funding LLC, dated as of April 30, 200l.

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*10.11 Waiver and Amendment to Loan Agreement dated March 11, 2002.

*10.12 First Amendment to Receivables Purchase Agreement dated as of
August 24, 2001.

*10.13 First Amendment to Purchase and Sale Agreement dated as of August
24, 2001.

*10.14 CSS Industries, Inc. 2000 Stock Option Plan for Non-Employee
Directors.

Management Contracts, Compensatory Plans or Arrangements
--------------------------------------------------------

*10.15 CSS Industries, Inc. 1994 Equity Compensation Plan (as last
amended January 23, 1996). (8) (Exhibit 10.10)

10.16 CSS Industries, Inc. Non-Qualified Supplemental Executive
Retirement Agreements, dated March 3, 1993, with certain
executive officers of the Company. (2) (Exhibit 10.15)

10.17 CSS Industries, Inc. Non-Qualified Supplemental Executive
Retirement Plan Guidelines, dated January 25, 1994. (4) (Exhibit
10.14)

10.18 CSS Industries, Inc. Annual Incentive Compensation Arrangement,
Administrative Guidelines, dated March 15, 1993 (as amended
January 1, 2000). (10) (Exhibit 10.11)

10.19 The Paper Magic Group, Inc. Management Incentive Bonus Program,
Administrative Guidelines, dated March 15, 1993. (2) (Exhibit
10.28)

10.20 1994 Amendment to The Paper Magic Group, Inc. Management
Incentive Bonus Program, Administrative Guidelines, dated March
2, 1994. (4) (Exhibit 10.26)

10.21 Berwick Industries, Inc. Incentive Bonus Plan, dated January 1,
1994. (4) (Exhibit 10.27)

10.22 Cleo Inc Management Incentive Plan, dated March 7, 1996. (6)
(Exhibit 10.23)

10.23 Berwick Industries, Inc. Non-Qualified Supplemental Executive
Retirement Plan, dated November 18, 1996. (7) (Exhibit 10.26)

10.24 The Paper Magic Group, Inc. Non-Qualified Supplemental Executive
Retirement Plan, dated December 5, 1996. (7) (Exhibit 10.27)

10.25 Cleo Inc Non-Qualified Supplemental Executive Retirement Plan
dated November 26, 1996. (9) (Exhibit 10.18)

10.26 Employment Agreement dated as of June 1, 1999 between CSS
Industries, Inc. and David J. M. Erskine. (10) (Exhibit 10.20)

10.27 Employment Offer Letter dated as of June 3, 1999 between The
Paper Magic Group, Inc. and Steven A. Cohen. (10) (Exhibit 10.21)

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Other
-----

21. List of Significant Subsidiaries of the Registrant. (11)
(Exhibit 21)

*99. Arthur Andersen LLP Representations.

Footnotes to List of Exhibits
-----------------------------

- -----------------
*Filed with this Annual Report on Form 10-K.

(1) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1990 and incorporated herein by reference.

(2) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1992 and incorporated herein by reference.

(3) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1991 and incorporated herein by reference.

(4) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1993 and incorporated herein by reference.

(5) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1994 and incorporated herein by reference.

(6) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1995 and incorporated herein by reference.

(7) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1996 and incorporated herein by reference.

(8) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1997 and incorporated herein by reference.

(9) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1998 and incorporated herein by reference.

(10) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 1999 and incorporated herein by reference.

(11) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the
fiscal year ended December 31, 2000 and incorporated herein by reference.

(12) Filed as an exhibit to Form 8-K (No. 1-2661) dated March 15, 2002 and
incorporated herein by reference.

- 39 -

The Company agrees to furnish supplementally a copy of omitted
Schedules and Exhibits, if any, with respect to Exhibits listed above upon
request.

Stockholders who have been furnished a copy of this Report may obtain
copies of any Exhibit listed above on payment of $.50 per page for reproduction
and mailing charges by writing to the Secretary, CSS Industries, Inc., 1845
Walnut Street, Philadelphia, Pennsylvania 19103.

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CSS INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

(In thousands)

Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
-------------------------
Balance Charged
at to Costs Charged Balance
Beginning and to Other at End of
of Period Expenses Accounts Deductions Period
--------- -------- -------- ---------- --------

Year ended March 31, 2002
Doubtful accounts receivable-customers....... $ 923 $10,936 (c) $ 667 (b) $ 10,977 (c) $ 1,549
Accrued restructuring expenses............... 0 - 4,541 (b) - 4,541

Three months ended March 31, 2001
Doubtful accounts receivable-customers....... $1,512 $ 174 $ - $ 763 $ 923

Year ended December 31, 2000
Doubtful accounts receivable-customers....... $1,647 $ 1,323 $ - $ 1,458 $1,512

Year ended December 31, 1999
Doubtful accounts receivable-customers....... $1,772 $ 1,302 $ 67 (a) $ 1,494 $1,647

Notes: (a) Balance at acquisition of Don Post Studios.
(b) Balance at acquisition of Offray.
(c) Includes gross Kmart bad debt write-off before gain on Put Agreement
of $5,436.

- 41 -

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
Annual Report to be signed on behalf of the undersigned hereunto duly authorized.

CSS INDUSTRIES, INC.
---------------------------------------------------------------------------------------------
Registrant

Dated: May , 2002 By /s/ David J. M. Erskine
------------------------------------------------------------------------------------------
David J. M. Erskine, President and Chief Executive Officer
(principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on
behalf of the Registrant and in the capacities on the date indicated.

Dated: May , 2002 /s/ David J. M. Erskine
------------------------------------------------------------------------------------------
David J. M. Erskine, President and Chief Executive Officer
(principal executive officer and a director)

Dated: May , 2002 /s/ Clifford E. Pietrafitta
------------------------------------------------------------------------------------------
Clifford E. Pietrafitta, Vice President - Finance and Chief Financial Officer
(principal financial and accounting officer)

Dated: May , 2002 /s/ Jack Farber
------------------------------------------------------------------------------------------
Jack Farber, Director

Dated: May , 2002 /s/ James H. Bromley
------------------------------------------------------------------------------------------
James H. Bromley, Director

Dated: May , 2002 /s/ Stephen V. Dubin
------------------------------------------------------------------------------------------
Stephen V. Dubin, Director

Dated: May , 2002 /s/ Richard G. Gilmore
------------------------------------------------------------------------------------------
Richard G. Gilmore, Director

Dated: May , 2002 /s/ Leonard E. Grossman
------------------------------------------------------------------------------------------
Leonard E. Grossman, Director

Dated: May , 2002 /s/ James E. Ksansnak
------------------------------------------------------------------------------------------
James E. Ksansnak, Director

Dated: May , 2002 /s/ Michael L. Sanyour
------------------------------------------------------------------------------------------
Michael L. Sanyour, Director

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