SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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CSS INDUSTRIES, INC.
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CSS INDUSTRIES, INC.
1845 Walnut Street
Philadelphia, Pennsylvania 19103
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
Dear Stockholder:
The 2003 Annual Meeting of Stockholders of CSS Industries, Inc. will be held
at The Rittenhouse, 210 West Rittenhouse Square, Philadelphia, PA 19103 on
Wednesday, August 6, 2003, at 9:30 a.m. local time.
At our Annual Meeting, we will ask you to:
1. Elect a board of eight directors; and
2. Transact any other business that may properly be presented at the
Annual Meeting.
If you were a stockholder of record at the close of business on June 10,
2003, you may vote at the Annual Meeting.
By order of the board of
directors,
STEPHEN V. DUBIN
Executive Vice President and
Secretary
Philadelphia, Pennsylvania
June 27, 2003
We hope that you will attend the Annual Meeting. Whether or not you plan to
attend the meeting, we invite and encourage you to complete, sign and return
the enclosed proxy in the envelope provided.
CSS INDUSTRIES, INC.
1845 Walnut Street
Philadelphia, Pennsylvania 19103
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PROXY STATEMENT
2003 Annual Meeting of Stockholders
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WHY YOU RECEIVED THIS PROXY STATEMENT
You received this proxy statement because the board of directors of CSS
Industries, Inc. ("CSS") is soliciting your proxy to vote at the 2003 Annual
Meeting of Stockholders ("Meeting") to be held at The Rittenhouse, 210
Rittenhouse Square, Philadelphia, Pennsylvania 19103 on Wednesday, August 6,
2003 at 9:30 a.m. local time. This proxy statement provides information that
should assist you in voting on matters presented at the Meeting. You may vote
in one of two ways: (i) in person, by attending the Meeting and casting your
vote, or (ii) by proxy, by completing, signing and returning the enclosed
proxy card. We are sending this proxy statement and the accompanying form of
proxy to stockholders beginning on June 27, 2003.
WHO CAN VOTE
Stockholders of record at the close of business on June 10, 2003 may vote at
the Meeting. On this record date, 7,777,487 shares of CSS common stock, par
value $.10 per share, were outstanding. Each share of common stock is entitled
to one vote on any matter which is properly presented at the Meeting. On May
27, 2003, CSS approved a 3 for 2 common stock split distributable on July 10,
2003 to stockholders of record at the close of business on June 30, 2003. The
share information in this proxy statement does not reflect this stock split.
WHO WILL PAY THE COSTS OF THIS PROXY SOLICITATION
We are paying for this solicitation of proxies. In addition to this mailing,
proxies may be solicited by telephone by officers, directors or employees of
CSS and its affiliated companies, who will not receive payment specifically
for these services. We reimburse banks, brokerage houses and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket expenses in
forwarding solicitation material to the beneficial owners of CSS shares.
HOW TO BE PART OF AN EFFECTIVE VOTE
In order to have an effective vote on any matter at the Meeting, there must
be a quorum. A quorum exists when the holders of a majority of the shares
entitled to vote are present in person or represented by proxy. Directors will
be elected by a plurality of the votes cast at the Meeting. This means that
the eight nominees receiving the most votes will be elected as directors.
Approval of any other matter to be voted on at the Meeting requires the
affirmative vote of the holders by a majority of the shares, present in person
or represented by proxy at the Meeting.
You may vote at the Meeting by attending in person and submitting a ballot
or by completing and properly submitting the enclosed proxy. The shares
represented by each properly completed proxy card will be voted at the Meeting
in accordance with each stockholder's choices. For the election of directors,
votes may be cast in favor or withheld. Votes that are withheld will not be
counted in the vote and will have no effect, other than to determine the
presence of a quorum. Abstentions may not be specified for the election of
directors. On all other matters, an abstention is counted as a vote against,
and a broker "non-vote" generally is not counted on such matters. A "broker
non-vote" occurs when a nominee (such as a broker) does not vote on a
particular proposal because the nominee does not have discretionary voting
power with respect to that item and has not received instructions from the
beneficial owner.
If you do not indicate on the proxy card how you wish to have your shares
voted, the shares will be voted as recommended by the board of directors. If
any additional matters are properly presented to the Meeting, the proxy
holders will vote in their discretion. This authority is given to the proxy
holders in the enclosed form of proxy.
HOW YOU MAY REVOKE YOUR PROXY
You may revoke your proxy at any time before the vote is taken at the
Meeting by filing with the Secretary of CSS a written revocation or another
form of proxy bearing a date later than the date of the proxy that you
submitted previously. You may also revoke your proxy by attending the Meeting
and voting in person. Your attendance at the Meeting will not in and of itself
constitute revocation of a proxy if you do not file a written revocation,
submit a later-dated proxy or vote in person.
Your vote is important. We therefore invite and encourage you to complete,
sign and return the accompanying proxy whether or not you plan to attend the
Annual Meeting.
OUR INDEPENDENT ACCOUNTANTS, THEIR FEES AND THEIR ATTENDANCE AT THE ANNUAL
MEETING
KPMG LLP ("KPMG") served as our independent public accountants for our
fiscal year ended March 31, 2003. A representative of KPMG is expected to
attend the Meeting. This representative will have an opportunity to make a
statement, if he or she desires, and will be available to respond to your
questions. Arthur Andersen LLP ("Andersen") served as our independent public
accountants for our fiscal year ended March 31, 2002.
The following fees were billed by KPMG for services performed by KPMG during
our fiscal year ended March 31, 2003 and by Andersen for services performed by
Andersen during our fiscal year ended March 31, 2002:
Type of Fee 2003 2002
----------- -------- ----------
Audit Fees $491,000 $ 326,500
Audit-Related Fees 47,511 232,900
Tax Fees 46,000 75,200
All Other Fees -- 712,449
-------- ----------
$584,511 $1,347,129
======== ==========
The Audit Committee considered whether the provision of services other than
financial statement audit and review services by KPMG was compatible with
maintaining KPMG's independence.
Audit Fees
Audit fees were paid for the audit of CSS' annual consolidated financial
statements and the reviews of CSS' consolidated financial statements included
in CSS' Quarterly Reports on Form 10-Q.
Audit-Related Fees
Audit-related fees were paid for services that included due diligence
services and closing balance sheet audits related to the acquisition of
Crystal Creative Products, Inc. in 2003 and related primarily to the
acquisition of certain assets of C. M. Offray and Son, Inc. in 2002.
Tax Fees
Tax fees were paid for tax compliance, tax advice and tax planning. Such
services included assistance with tax return preparation and tax advice
relating to acquisitions.
All Other Fees
There were no fees billed in 2003 for products and services provided by KPMG
other than the services referred to above. In 2002, fees were billed by
Andersen for professional services relating to the Company's financial
information systems design and implementation.
On May 21, 2002, our Board of Directors, upon the recommendation of the
Audit Committee, decided to no longer engage Andersen as the Company's
independent public accountants effective June 11, 2002. Andersen's reports on
our consolidated financial statements for our fiscal year ended December 31,
2000, the transition period of January 1, 2001 to March 31, 2001 (the
"Transition Period") and our fiscal year ended March 31, 2002 (collectively
"Accounting Periods") did not contain an adverse opinion or disclaimer of
opinion, nor were they
2
qualified or modified as to uncertainty, audit scope or accounting principles.
During each of the Accounting Periods and through the date of Andersen's
dismissal, there were no disagreements with Andersen on any matter of
accounting principle or practice, financial statement disclosure, or auditing
scope or procedure which, if not resolved to Andersen's satisfaction, would
have caused it to make reference to the subject matter of the disagreements in
connection with its reports on our consolidated financial statements with
respect to the Accounting Periods.
On July 3, 2002, our Board of Directors, upon the recommendation of the
Audit Committee, engaged KPMG as its independent pubic accountants to audit
our financial statements for our fiscal year ending March 31, 2003.
CSS SECURITY OWNERSHIP
The following table shows all persons who we know to beneficially own at
least 5% of our common stock as of June 10, 2003, unless otherwise noted. The
table also shows, as of that date, all beneficial ownership of our common
stock by each of our current directors, each of the executive officers listed
in the Summary Compensation Table under "Executive Compensation" below and all
directors and executive officers as a group.
Number
of Shares Percent
Beneficial Owner Beneficially of
---------------- Owned(1) Class(2)
------------ --------
Dimensional Fund Advisors Inc. ...................... 599,200(3) 7.7%
T. Rowe Price Associates, Inc. and T. Rowe Price
Small-Cap Value Fund, Inc.......................... 881,600(4) 11.3%
James H. Bromley .................................... 301,559(5) 3.9%
Stephen V. Dubin .................................... 370,257(6) 4.8%
David J. M. Erskine ................................. 211,925(7) 2.7%
Jack Farber ......................................... 1,906,321(8) 24.5%
Leonard E. Grossman ................................. 214,482(9) 2.8%
James E. Ksansnak ................................... 29,233(10) *
Rebecca C. Matthias ................................. 0 *
Michael L. Sanyour .................................. 20,387(11) *
Steven A. Cohen ..................................... 35,775(12) *
Clifford E. Pietrafitta ............................. 74,198(13) *
All directors and executive officers of CSS as a
group (twelve (12) persons, including the
individuals named above)........................... 3,227,054(8)(14) 41.5%
---------------
(1) "Beneficial ownership" is determined in accordance with Securities and
Exchange Commission ("SEC") regulations. Therefore, the table lists all
shares as to which a person listed has or shares the power to vote or to
direct disposition. In addition, shares issuable upon the exercise of
outstanding stock options exercisable at June 10, 2003 or within 60 days
thereafter are considered outstanding and to be beneficially owned by the
person holding such options for the purpose of computing such person's
beneficial ownership, but are not deemed outstanding for the purposes of
computing the beneficial ownership of any other person. Unless otherwise
indicated, each person has the sole power to vote and to direct
disposition of the shares listed as beneficially owned by such person.
(2) This percentage is calculated based upon a total of 7,777,487 shares of
common stock outstanding at June 10, 2003. An asterisk indicates that
ownership is less than 1% of the class.
(3) This information is as of March 31, 2003. Dimensional Fund Advisors Inc.
("Dimensional") is located at 1299 Ocean Avenue, 11th Floor, Santa
Monica, CA 90401. Dimensional has advised us that they are an investment
advisor registered under Section 203 of the Investment Advisors Act of
1940 and that they furnish investment advice to four investment companies
registered under the Investment Company Act of 1940, and serve as
investment manager to certain other investment vehicles, including
commingled group trusts. (These investment companies and investment
vehicles are referred to as the "Portfolios"). Dimensional has advised us
that in its role as investment advisor and investment manager,
Dimensional
3
possesses both investment and voting power over these securities.
Dimensional has advised us the Portfolios own all of these securities.
For purposes of the reporting requirements of the securities laws,
Dimensional is deemed to be the beneficial owner of such securities;
however, Dimensional expressly disclaims that it is the beneficial owner
of such securities.
(4) This information is as of March 31, 2003 and is derived from Schedule
13F, filed on May 14, 2003 by T. Rowe Price Associates, Inc. ("Price
Associates") and supplemental information provided by Price Associates.
Price Associates is located at 100 E. Pratt Street, Baltimore, MD 21202.
Price Associates has advised us that these securities are owned by
various individuals and institutional investors for which Price
Associates serves as investment adviser with power to direct investments.
Price Associates has further advised us that it has sole voting power
over 227,800 of the shares listed in the table, T. Rowe Price Small-Cap
Value Fund, Inc. ("Value Fund") has sole voting power over 620,000 of
such shares and individual and institutional investors have sole voting
power over the remaining 33,800 shares. For purposes of the reporting
requirements of the Securities Act of 1934, Price Associates is deemed to
be a beneficial owner of the securities listed; however, Price Associates
expressly disclaims that it is the beneficial owner of such shares.
(5) The shares shown in the table include options to purchase 10,000 shares
of common stock.
(6) The shares shown in the table include options to purchase 102,100 shares
of common stock.
(7) The shares shown in the table include options to purchase 188,925 shares
of common stock, 4,000 shares owned by Mr. Erskine's wife, 500 shares
owned by a trust for the benefit of Mr. Erskine's stepson in which Mr.
Erskine and his wife are co-trustees, 500 shares owned by a trust for the
benefit of another stepson of Mr. Erskine in which Mr. Erskine's wife is
a co-trustee with another person and 500 shares owned directly by Mr.
Erskine's son. Mr. Erskine disclaims beneficial ownership of all such
shares owned directly by either his spouse or his son or beneficially by
the trusts for the benefit of his stepsons.
(8) Mr. Farber, who has a business address at 1845 Walnut Street, Suite 800,
Philadelphia, PA 19103, owns 19,290 shares directly. In addition, he owns
1,465,151 shares beneficially through his ownership of general and
limited partnership interests in Delv, L.P. Mr. Farber is the sole
stockholder of the general partner of Delv and his daughter is the sole
director and is President, Secretary and Treasurer of the general partner
of Delv. Also included among the shares beneficially owned by Mr. Farber
are 234,028 shares held directly by Mr. Farber's wife, 132,202 shares of
common stock owned by a trust for the benefit of Mr. Farber's son, for
which Mr. Farber serves as co-trustee with his son and 55,650 shares
owned by trusts for the benefit of two of Mr. Farber's grandchildren for
which Mr. Farber's wife serves as co-trustee with his daughter. Mr.
Farber disclaims beneficial ownership of all shares owned directly or
beneficially by his wife and by the trusts for the benefit of his family
members. Not included in the number of shares beneficially owned by Mr.
Farber are shares held by the Farber Foundation or the Farber Family
Foundation, Inc. as to which Mr. Farber and the other directors and
officers of CSS who are members, directors or officers of the Farber
Foundation disclaim beneficial ownership. The Farber Foundation, Inc., a
charitable foundation in which Mr. Farber and certain officers of CSS are
officers and directors, owns 67,784 shares, and the Farber Family
Foundation, Inc., a charitable foundation in which Mr. Farber is an
officer and director, owns 144,000 shares. As a matter of policy, the
Farber Foundation, Inc. and the Farber Family Foundation will not vote
the shares of common stock that they own.
(9) The shares shown in the table include 3,700 shares of common stock held
by Mr. Grossman's wife, as to which Mr. Grossman disclaims beneficial
ownership, and options to purchase 18,000 shares of common stock.
(10) The shares shown in the table include 11,233 shares owned by a trust for
the benefit of Mr. Ksansnak and options to purchase 18,000 shares of
common stock.
(11) The shares shown in the table reflect options to purchase 18,000 shares
of common stock.
(12) The shares shown in the table reflect options to purchase 34,775 shares
of common stock.
(13) The shares shown in the table include options to purchase 60,775 shares
of common stock.
(14) The shares shown in the table include options to purchase a total of
497,502 shares of common stock.
4
ELECTION OF DIRECTORS
Our board of directors currently has eight members. Directors who are
elected will hold office until the 2004 annual meeting of stockholders and
until the election and qualification of their respective successors. The board
of directors has nominated for election as directors the persons whose names
are listed below, all of whom are presently directors of CSS. The board of
directors believes all of these persons will be able to serve as directors.
However, if this should not be the case, the proxies may be voted for one or
more substitute nominees, to be designated by the board of directors, or the
board of directors may decide to reduce the number of directors.
The board of directors recommends a vote FOR the election of all the
nominees listed below.
Please review the following information about the nominees for election to
our board of directors.
James H. Bromley..................... Mr. Bromley, 64, has been an independent
consultant since September 1996. From
September 1996 to December 1997 he
served as Chairman of our former Direct
Mail Business Products Group and Vice
Chairman of Rapidforms, Inc., formerly a
subsidiary of CSS. He has served as one
of our directors since 1989.
Stephen V. Dubin..................... Mr. Dubin, 65, has been our Executive
Vice President since June 1999. From May
1996 to June 1999, he served as Senior
Vice President - Law and Human
Resources. Mr. Dubin has also been our
Secretary and General Counsel since
1978. From 1978 to May 1996, he also
served as a Vice President of CSS. He
has served as one of our directors since
November 1995.
David J. M. Erskine.................. Mr. Erskine, 56, has been our President
and Chief Executive Officer since June
1999. From August 1996 to May 1999, he
served as President and from February
1997 to May 1999, he also served as
Chief Executive Officer of Scott Paper
Limited, a manufacturer and distributor
of tissue products, located in Ontario,
Canada. He has served as one of our
directors since July 1999.
Jack Farber.......................... Mr. Farber, 70, has been our Chairman
since 1979. From 1979 to May 1999, he
was also our President and Chief
Executive Officer. Mr. Farber has served
as one of our directors since 1978.
Leonard E. Grossman.................. Mr. Grossman, 68, has been a private
investor since 1989. Mr. Grossman has
served as one of our directors since
1982.
James E. Ksansnak.................... Mr. Ksansnak, 63, became Chairman of the
Board and a Director of Tasty Baking
Company in May 2003. He served as Vice
Chairman of ARAMARK Corporation from May
1997 to February 2001 and currently
serves on its Board of Directors. Mr.
Ksansnak has served as one of our
directors since 1988.
Rebecca C. Matthias.................. Ms. Matthias, 50, has been President and
a Director of Mothers Work, Inc. since
1982. She also has served as Chief
Operating Officer of Mothers Work, Inc.
since January 1993. Ms. Matthias has
served as one of our directors since
2003.
Michael L. Sanyour................... Mr. Sanyour, 72, has been a Principal of
CMS Companies, a financial services and
insurance concern, since 1987. He has
served as one of our directors since
1980.
5
GENERAL INFORMATION ABOUT OUR BOARD OF DIRECTORS AND ITS COMMITTEES
Our board of directors held ten meetings and acted three times by Unanimous
Consent during our last fiscal year. The board of directors annually selects
members of the Executive, Audit and Human Resources Committees. Our Human
Resources Committee performs functions similar to compensation committees of
other public companies. Another committee, the stock option committee under
the CSS 2000 Stock Option Plan for Non-Employee Directors (the "2000 Plan"),
consists of those members of the board of directors who are also our
employees. We have no nominating committee.
EXECUTIVE COMMITTEE
The Executive Committee of the board of directors presently is composed of
Messrs. Farber, Erskine and Sanyour. The Executive Committee may exercise all
of the authority of the board of directors in our business and affairs to the
extent permitted by law. The role of the Executive Committee is to take action
on behalf of our Company at a time when action of the entire board is not
feasible. The Executive Committee did not hold any meetings during our last
fiscal year, but the Executive Committee did act four times by Unanimous
Consent during our last fiscal year.
AUDIT COMMITTEE
The Audit Committee of the board of directors presently consists of Messrs.
Bromley, Grossman and Ksansnak. The members of the Audit Committee are
"independent" as that term is defined in the listing standards of the New York
Stock Exchange. The board intends to elect at least three members of the Audit
Committee following the Meeting, all of whom will be "independent." The Audit
Committee held seven meetings and acted once by Unanimous Consent during our
last fiscal year.
The primary responsibilities of the Audit Committee are to review our
financial reporting process, select, oversee and approve the compensation of
the independent accountants and, if necessary, the replacement of such
accountants, to monitor the independence of such accountants, to pre-approve
all auditing services and all allowable non-audit services to be provided by
the independent accountants and to review and approve the audit plan and the
results of the audit engagement.
In addition, the Committee is responsible for reviewing policies and
guidelines regarding risk assessment, risk management, major financial risk
exposures and the steps management has taken to monitor and control such
risks. The Committee is also responsible for meeting periodically with the
senior personnel performing the internal audit function, the general counsel's
office, and the independent accountants to review the Company's policies and
procedures regarding disclosures that may affect the financial statements,
compliance with applicable laws and regulations and the Company's Code of
Business Ethics and Internal Disclosure Procedures. The Committee is also
responsible for overseeing the Company's internal controls and procedures.
The Audit Committee's Charter has been revised by the Board of Directors of
the Company. This revised Charter is attached to this Proxy Statement as
Appendix A. The Audit Committee has issued its report which is contained in
this Proxy Statement.
HUMAN RESOURCES COMMITTEE
The Human Resources Committee of the board of directors presently consists
of Messrs. Bromley, Ksansnak and Sanyour. No member of the Human Resources
Committee is an employee of CSS or any of its subsidiaries. The Human
Resources Committee is responsible for developing and administering the CSS
executive compensation policies, plans and programs. In addition, the Human
Resources Committee (1) determines on an annual basis the compensation to be
paid to our Chairman and to our President and Chief Executive Officer, (2)
determines the appropriate level of compensation for our other executive
officers and members of our senior management following receipt of the
recommendations of our President and Chief Executive Officer, (3) reviews and
approves the compensation level of other employees of CSS and its subsidiaries
with an annual base salary exceeding $150,000, and (4) makes grants and has
general administrative authority under the 1994 Equity Compensation Plan (the
"1994 Plan"). It held two meetings and acted ten times by Unanimous Consent
during our last fiscal year. A Charter for the Human Resources Committee was
adopted by the Board of Directors of the Company earlier this year. This
Charter is attached to this Proxy Statement as Appendix B.
6
2000 PLAN COMMITTEE
The 2000 Plan Committee administers the 2000 Plan. The 2000 Plan Committee
acted once by Unanimous Consent during our last fiscal year.
COMPENSATION OF DIRECTORS
Each of our directors who is not a full time employee of CSS or its
subsidiaries receives an annual fee of $17,000 plus $750 for attendance at
each meeting of the board or its committees or for each consultation with
management, and is entitled to participate in the 2000 Plan. The chairmen of
the Audit Committee and the Human Resources Committee each receive an
additional annual fee of $2,000. The 2000 Plan provides for the automatic
annual grant of nonqualified stock options to purchase 4,000 shares of our
common stock to each of our non-employee directors as of the last business day
of November in each year, from 2001 through 2005. In accordance with the terms
of the 2000 Plan, each of our then non-employee directors received an
automatic grant of options to purchase 4,000 shares of our common stock on
November 29, 2002 at an exercise price of $34.90 per share. In accordance with
the 2000 Plan, the exercise price was the closing price per share of our
common stock on the date the options were granted. Each option will expire ten
years after the date the options were granted. One quarter of the options will
become exercisable on each of the first four anniversaries of the date of
grant.
DISCLOSURE WITH RESPECT TO THE COMPANY'S EQUITY COMPENSATION PLANS
The following table shows information about the equity awards under the 1994
Plan, the CSS 1995 Stock Option Plan for Non-Employee Directors (the "1995
Plan") and the 2000 Plan, all of which were approved by the stockholders of
CSS.
Securities Authorized For Issuance Under Equity Compensation Plans
Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance
Plan category exercise of exercise price of under equity
------------- outstanding options outstanding options compensation plans
-------------------- ------------------- -----------------------
Equity compensation plans approved by security holders.... 1,596,689 $25.00 1,042,536
Equity compensation plans not approved by security
holders ................................................ -- -- --
--------- ------ ---------
Total..................................................... 1,596,689 $25.00 1,042,536
========= ====== =========
OUR EXECUTIVE OFFICERS
Please review the information in this Proxy Statement about our current
executive officers. The names and biographical information of those executive
officers who are not directors are set forth below. Our executive officers are
elected annually by the board of directors to serve until their successors are
elected and qualified or until their earlier resignation or removal.
Steven A. Cohen...................... Mr. Cohen, 49, has been our Vice
President -- Licensing since June 1999.
From October 1989 to June 1999, he
served as Executive Vice President of
Disguise Inc., a manufacturer and
distributor of costumes, and its
predecessor in interest.
John J. Nucero....................... Mr. Nucero, 44, has been our Vice
President -- Internal Audit since August
2002. From January 2000 to August 2002,
Mr. Nucero served as Vice President --
Business Development. For over five
years until December 1999, he served in
various capacities with The Paper Magic
Group, Inc. ("Paper Magic") and most
recently served as its Senior Vice
President -- Finance. Paper Magic is a
subsidiary of CSS.
7
Clifford E. Pietrafitta.............. Mr. Pietrafitta, 41, has been our Vice
President - Finance since November 1995
and has been our Chief Financial Officer
since January 1999. From 1991 to January
1999, he was our Treasurer.
Stefanie L. Smoke.................... Ms. Smoke, 36, has been our Treasurer
and an Assistant Secretary since
December 2001. Ms. Smoke has been our
Corporate Controller since May 2000.
From April 1997 to May 2000, she served
as Vice President of Finance and
Accounting of Kitchen Company, Inc., a
retailer of houseware products.
EXECUTIVE COMPENSATION
The following table shows the total compensation of our Chief Executive
Officer and the four other most highly compensated executive officers for
services performed for the fiscal years ended March 31, 2003 and March 31,
2002, as well as the total compensation earned by each such individual for the
Transition Period and for calendar year 2000.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
---------------------- ------------
Awards
------
Securities
Underlying All Other
Name and Options Compensation
Principal Position Period Salary ($) Bonus ($) (#) $
------------------ ---------- ---------- --------- ------------ ------------
David J. M. Erskine 4/1/02 - 3/31/03 426,063 411,487 0 65,006(1)
President and Chief 4/1/01 - 3/31/02 398,000 564,663 21,600 43,988
Executive Officer 1/1/01 - 3/31/01 97,250 136,289 27,000 1,700
1/1/00 - 12/31/00 374,400 351,000 26,700 9,614
Jack Farber 4/1/02 - 3/31/03 426,063 365,766 0 60,132(2)
Chairman of the Board and 4/1/01 - 3/31/02 425,000 496,908 0 48,994
Former President and 1/1/01 - 3/31/01 106,250 122,805 0 1,700
Chief Executive Officer of CSS 1/1/00 - 12/31/00 425,000 398,438 0 24,914
Stephen V. Dubin 4/1/02 - 3/31/03 281,703 290,203 0 42,587(3)
Executive Vice President 4/1/01 - 3/31/02 272,750 378,663 15,000 29,828
Secretary and 1/1/01 - 3/31/01 67,500 92,607 18,800 1,700
General Counsel 1/1/00 - 12/31/00 260,000 234,000 18,600 15,014
Steven A. Cohen 4/1/02 - 3/31/03 245,495 102,415 0 23,075(4)
Vice President - Licensing 4/1/01 - 3/31/02 240,250 139,134 8,800 19,136
1/1/01 - 3/31/01 59,500 34,386 10,800 1,470
1/1/00 - 12/31/00 228,000 85,800 10,900 5,964
Clifford E. Pietrafitta 4/1/02 - 3/31/03 190,475 197,858 0 28,080(5)
Vice President - Finance 4/1/01 - 3/31/02 178,750 258,083 9,700 18,998
and Chief Financial Officer 1/1/01 - 3/31/01 43,750 62,400 14,000 1,700
1/1/00 - 12/31/00 165,000 148,500 11,800 9,264
---------------
(1) Includes $9,453 contributed by CSS under the Section 401 (k) portion of
the 401 (k) Profit Sharing Plan of Cleo Inc ("Cleo Profit Sharing Plan")
and $55,553 contributed by CSS under a supplemental executive retirement
plan.
8
(2) Includes $9,453 contributed by CSS under the Cleo Profit Sharing Plan and
$50,679 contributed by CSS under a supplemental executive retirement
plan.
(3) Includes $9,453 contributed by CSS under the Cleo Profit Sharing Plan and
$33,134 contributed by CSS under a supplemental executive retirement
plan.
(4) Includes $9,453 contributed by CSS under the Cleo Profit Sharing Plan and
$13,622 contributed by CSS under a supplemental executive retirement
plan.
(5) Includes $9,453 contributed by CSS under the Cleo Profit Sharing Plan and
$18,627 contributed by CSS under a supplemental executive retirement
plan.
No options were granted by CSS to the chief executive officer and the four
other most highly compensated executive officers during the fiscal year ended
March 31, 2003. On April 24, 2003, options were granted to the officers named
in the Summary Compensation Table above other than Mr. Farber. The number of
shares of common stock underlying grants made to these executive officers is
as follows: Mr. Erskine, 12,900; Mr. Dubin, 8,500; Mr. Cohen, 5,000; and Mr.
Pietrafitta, 5,800. The exercise price of the options was $35.75, which was
the closing price per share reported by the New York Stock Exchange on the
date preceding the grants. Options vest in equal increments on each of the
first four anniversaries of the date of grant.
Fiscal Year End Option Values
The table below shows information regarding the value of unexercised options
at March 31, 2003 held by our five most highly compensated executive officers.
None of the executive officers exercised options during the fiscal year ended
March 31, 2003.
Fiscal Year End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at March 31, 2003 March 31, 2003 ($)
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
David J. M. Erskine ................................................. 151,425 73,875 1,254,893 659,678
Jack Farber ......................................................... -- -- -- --
Stephen V. Dubin .................................................... 102,100 25,300 1,008,250 276,313
Steven A. Cohen ..................................................... 30,775 19,725 279,378 190,633
Clifford E. Pietrafitta ............................................. 60,775 17,225 613,891 189,486
Supplemental Executive Retirement Benefits and Other Deferred Compensation
Arrangements
Under applicable provisions of the Internal Revenue Code, we are required to
disregard an employee's annual compensation in excess of a specified dollar
amount ($200,000 in 2003 and 2002) in determining the profit-sharing plan
contribution that is made on behalf of such employee. We established our
supplemental executive retirement plan ("SERP") to provide additional
retirement benefits to eligible employees, with regard to compensation in
excess of this dollar limit.
Under the CSS SERP, all eligible employees in the United States are entitled
to have an amount credited for their benefit on our books equal to the product
of (x) the percentage then used in deriving the dollar amount approved by the
participating company's board of directors as the Company's profit sharing
plan contribution for such calendar year and (y) the difference between the
employee's total cash compensation for such calendar year and the dollar
amount of the compensation limitation. Participant balances are adjusted by
the investment performance of various investment benchmarks as selected by the
participant. All amounts payable to any officer for whose benefit amounts have
been credited represent an unsecured debt of CSS.
Under an agreement dated March 3, 1993, Mr. Dubin became eligible for
certain unfunded non-qualified annual retirement benefits and death benefits.
Benefits are payable upon termination of active employment. A pre-retirement
death benefit is also available under this agreement. The annual retirement
benefit if retirement occurs on or after age 65 is a fixed annual payment for
fifteen years. Since Mr. Dubin has continued his employment with CSS beyond
age 65, his annual benefits will be $58,123 for fifteen years. Although we had
no
9
obligation to fund the benefits provided by this agreement, we purchased a
life insurance policy on the life of Mr. Dubin to provide funding for such
benefits.
Prior to our merger with Philadelphia Industries on January 21, 1993, Mr.
Farber was ineligible to participate in the Philadelphia Industries profit
sharing plan. Thus, Mr. Farber entered into a deferred compensation agreement
with Philadelphia Industries. We assumed this agreement upon the merger. It
provided for benefits upon retirement or separation of service equal to what
Mr. Farber would have received had he been eligible for participation in the
profit sharing plan and SERP. In 1993, Mr. Farber became eligible to
participate in the profit sharing plan in which CSS was participating and
continues as a participant in CSS' current plan. In February 1999, our
deferred compensation agreement with Mr. Farber was terminated, and at such
time Mr. Farber became eligible to participate in our SERP.
In February 1999, we entered into an agreement with Mr. Farber under which
we assumed an obligation to assist in funding a split dollar life insurance
policy on Mr. Farber's life by paying up to five annual premium payments. At
the time that we entered into this Agreement, the present value of the
aggregate premium payments was approximately equal to the obligations we would
have owed to Mr. Farber had the deferred compensation agreement not been
terminated. The fifth annual premium payments were paid on December 10, 2002
and January 10, 2003.
AUDIT COMMITTEE REPORT
The Audit Committee is composed of three directors who are independent as
defined by applicable New York Stock Exchange listing standards, and operates
under a written charter adopted by the board of directors. On June 5, 2003,
the Board of Directors adopted a revised charter for the Audit Committee, a
copy of which is attached to this Proxy Statement as Appendix A.
Management is responsible for the Company's internal controls, financial
reporting process and compliance with laws and regulations and ethical
business standards. The independent accountants are responsible for performing
an independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report on
them. The Committee's responsibility is to monitor and oversee these
processes.
In this context, the Committee has met and held discussions with management
and the independent accountants. Management represented to the Committee that
the Company's consolidated financial statements were prepared in accordance
with generally accepted accounting principles, and the Committee has reviewed
and discussed the consolidated financial statements with management and the
independent accountants. The Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing
Standards No. 61 ("Communication with Audit Committee"). The Company's
independent accountants also provided to the Committee the written disclosures
required by Independence Standards Board Standard No. 1 ("Independence
Discussions with Audit Committees"), and the Committee discussed with the
independent accountants that firm's independence.
The Committee meets with the Company's internal audit staff and its
independent accountants, with and without management present, to discuss the
results of their examinations, the evaluations of the Company's internal
controls, and the quality of the Company's financial reporting.
Based upon the Committee's review of the consolidated financial statements
and discussion with management, internal audit staff and the independent
accountants described above, the Committee recommended that the board of
directors include the audited consolidated financial statements in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2003
filed with the Securities and Exchange Commission.
AUDIT COMMITTEE
Leonard E. Grossman,
Chairman
James H. Bromley
James E. Ksansnak
10
HUMAN RESOURCES COMMITTEE REPORT
The Human Resources Committee is comprised of three non-employee directors,
all of whom meet the listing standards relating to director independence
currently proposed by the New York Stock Exchange.
On April 24, 2003, the Board of Directors of the Company adopted a charter
for the Human Resources Committee, a copy of which is attached to this Proxy
Statement as Appendix B. The Human Resources Committee oversees the
development and implementation of compensation policies, plans and programs
designed to encourage the enhancement of our profitability, and consequently
stockholder value. These objectives are addressed by relating a substantial
portion of the compensation of our senior management to our financial
performance. In essence, this portion of compensation is "at-risk" incentive
compensation that is tied in part to an executive's contribution to the
Company's successful financial performance. The Human Resources Committee also
administers and makes grants under the CSS 1994 Equity Compensation Plan. In
addition to providing incentives for financial performance, annual and longer
term incentive compensation is designed to attract, retain and reward members
of senior management who possess outstanding abilities and to motivate them to
perform to the full extent of their abilities.
Our compensation program for senior management consists of base salary,
annual performance bonuses, and longer term incentive compensation in the form
of stock options, restricted stock grants and stock appreciation rights,
benefits available generally to our employees (including retirement benefits
under profit sharing plans), and supplemental retirement plans or deferred
compensation agreements. The "at-risk" portion of the compensation program is
significant relative to overall compensation.
Base salary levels for our executive officers are reviewed on an annual
basis by the Human Resources Committee and are set generally to be competitive
with other companies of comparable size and geographic location, (which are
different than the companies in our "peer group" defined in the performance
graph in this proxy statement) utilizing in part compensation survey
information and also taking into consideration the position's complexity,
responsibility and need for special expertise. In this regard, salary levels
for our 2003 fiscal year were based upon survey information indicating a
projected average increase of 3.75% for the year. Base salaries also reflected
individual experience and achievement of individual preset performance
objectives. Such objectives include achievement of budget goals, improvement
in reporting quality, license acquisition and corporate development. We
considered the recommendations of the Company's President and Chief Executive
Officer in determining the compensation levels of the other executive
officers.
Incentive compensation for our executive officers is based upon the
achievement of certain threshold and target levels of diluted earnings per
common share by CSS (constituting 60 percent of potential incentive
compensation) and the level of achievement of individual preset performance
objectives relating to their respective areas of responsibility, such as
management of credit exposures, successful completion of internal audit
projects and development of human resources related strategies (constituting
40 percent of the potential incentive award). At the beginning of each year,
threshold target levels are established for CSS and its subsidiaries by the
Human Resources Committee to be used in determining annual performance
bonuses. The formulae permit discretion in determining the size of the bonus
pool, subject to certain parameters based upon the achievement of these
performance goals, and to a limited extent in allocating the bonus pool among
participants. During the fiscal year ended March 31, 2003, the diluted
earnings per common share exceeded the threshold level but did not reach the
target level and the percentage of the remaining potential incentive award
paid to the executive officers varied based on the Committee's determination
of the achievement of the respective performance objectives.
In determining Mr. Erskine's base salary, the Human Resources Committee has
taken into consideration pay levels of chief executive officers of other
companies of comparable size, the base salary levels of other officers of CSS
and Mr. Erskine's overall management strengths and achievement of preset
performance objectives, including achievement of budgetary goals, integration
of acquisitions and improvement of foreign sourcing as evidenced by CSS'
financial results. The Human Resources Committee does not apply any specific
weight to these factors. Mr. Erskine's incentive compensation was based upon
the achievement of threshold and targeted levels of diluted earnings per
common share of CSS and his level of achievement of preset performance goals
relating to certain financial and operational improvements of a Company
business unit, sourcing activities, selling
11
and marketing approaches and a major software system implementation project.
Mr. Erskine was awarded incentive compensation relating to diluted earnings
per share that exceeded the threshold level but did not reach the target level
and was awarded a portion of the remaining potential executive compensation
based on partial achievement of his performance goals.
The Human Resources Committee annually considers the desirability of
granting to officers and certain other employees of CSS and CSS' principal
operating subsidiaries stock options, restricted stock grants and stock
appreciation rights under the 1994 Plan. The objective of the 1994 Plan is to
align senior management and stockholder long-term interests by creating a
strong link between the executive's accumulation of wealth and stockholder
return as well as enabling executives to develop and maintain a significant,
long-term stock ownership position in our common stock. The Human Resources
Committee adopted a methodology for use beginning with 1998 stock option
grants which relates the number of stock options granted to each optionee to
the individual's position and salary level, provided that if circumstances
warrant, the Human Resources Committee may from time to time depart from
strict adherence to such methodology at its discretion. The Human Resources
Committee believes that its past grants of stock options have focused our
executive officers and other members of senior management on building
profitability and stockholder value. No stock options were granted to
executive officers during our fiscal year ended March 31, 2003 because the
Committee determined that stock options for executive officers should be
granted after the conclusion of the fiscal year, rather than in February, as
was the case in 2002.
Payments relating to the fiscal year ended March 31, 2003 to our senior
management under the various programs discussed above were made following
consideration of Section 162(m) of the Internal Revenue Code, which limits the
deduction that may be claimed by a "public company" for total compensation in
excess of $1 million paid to the chief executive officer or to any of the
other four most highly compensated officers unless the compensation qualifies
as "performance-based compensation." The 1994 Plan was designed to enable
stock options and stock appreciation rights granted under the 1994 Plan to
qualify as "performance-based compensation."
HUMAN RESOURCES
COMMITTEE
James E. Ksansnak, Chairman
James H. Bromley
Michael L. Sanyour
12
Performance Graph
The graph below compares the cumulative total stockholders' return on our
common stock for the period from April 1, 1998 through March 31, 2003, with
(i) the cumulative total return on the Standard and Poors 500 ("S&P 500")
Index and (ii) a peer group, as described below (assuming the investment of
$100 in common stock, the S&P 500 Index, and the peer group on April 1, 1998
and reinvestment of all dividends).
The peer group utilized consisted of American Greetings Corporation, Blyth,
Inc., Department 56, Inc., Russ Berrie and Company Inc. and Enesco Group, Inc.
We have selected this group as our peer group because they are engaged in
businesses that are sometimes categorized with our business. However, our
management believes that a comparison of our performance to this peer group
will be flawed, because the businesses of the peer group companies are in
large part different from ours. In this regard, we compete with only one
relatively small division of American Greetings, Blyth is principally focused
on fragranced candle products and related candle accessories, competing only
with some of our products through two divisions, and the other companies
principally sell collectible and/or giftware items.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
March 3003
[graphic omitted]
--------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
--------------------------------------------------------------------------------
CSS Inds. Inc. $100.00 $67.81 $58.29 $66.59 $99.08 $98.99
--------------------------------------------------------------------------------
S&P 500 $100.00 $118.46 $139.72 $109.43 $109.69 $82.53
--------------------------------------------------------------------------------
Peer Group $100.00 $83.99 $50.36 $51.23 $65.40 $59.01
--------------------------------------------------------------------------------
13
CERTAIN TRANSACTIONS
On June 24, 2002, we purchased an aggregate of 1,100,000 shares of our
common stock from our Chairman, Jack Farber, members of his family and trusts
for members of his family. The purchase, which occurred prior to the opening
of trading on the New York Stock Exchange, was made at a price of $33.00 per
share, which is $1.75 per share (5.0%) lower than the closing price reported
on the New York Stock Exchange on June 21, 2002, the previous trading day, and
$1.64 per share (4.7%) lower than the average closing price over the ten
trading days prior to the date of purchase.
The terms of the purchase were negotiated on our behalf by a Special
Committee of the Board of Directors consisting of three then independent
directors: Michael L. Sanyour (Chairman), Richard G. Gilmore and James E.
Ksansnak. The Special Committee retained an independent investment bank which
rendered an opinion to the Special Committee that, subject to the
qualifications expressed in the opinion, the consideration payable in
connection with the purchase of the shares was fair to the Company from a
financial point of view. A copy of the opinion is included with our Current
Report on Form 8-K filed on June 25, 2002, which may be accessed through the
SEC's web site at www.sec.gov. The Special Committee unanimously recommended
that our Board of Directors authorize the purchase, and our Board of
Directors, other than Mr. Farber who was not present at the meeting,
unanimously authorized the purchase. Our reference to the SEC's website is
intended to be an inactive textual reference only.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and directors and beneficial owners of more than ten percent of our common
stock to file reports of ownership of our securities and changes in ownership
with the SEC. Based on our review of Section 16(a) filings, we believe that
all filings required to be made during the fiscal year ended March 31, 2003
were made on a timely basis, except as follows: Mr. Nucero filed a report
after the applicable due date with respect to his acquisition of a fractional
share interest of 0.719 shares as a result of the automatic reinvestment of a
dividend received by him on shares of our common stock held in our Employee
Stock Purchase Plan.
STOCKHOLDER PROPOSALS
Any stockholder proposal to be presented at the 2004 Annual Meeting of
Stockholders must be received by us on or before February 28, 2004 in order to
be considered for inclusion in the proxy statement relating to the meeting. If
a stockholder does not seek to have a proposal included in the proxy
statement, but nevertheless wishes to present a proper proposal at the 2004
Annual Meeting of Stockholders, and the proposal is received by us on or
before May 13, 2004, we will provide information in the proxy statement
relating to that meeting as to the nature of the proposal and how persons
named in the proxy solicited by the board of directors intend to exercise
their discretion to vote on the matter.
CSS INDUSTRIES, INC.
By: Stephen V. Dubin,
Executive Vice President and Secretary
Philadelphia, Pennsylvania
June 27, 2003
14
Appendix A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
CSS INDUSTRIES, INC.
(Superceding the Audit Committee Charter
previously adopted by the Board of Directors)
I. Purpose
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of CSS Industries, Inc. (the "Company") is appointed by, and
generally acts on behalf of, the Board. The Committee's purposes shall
be:
A. To assist the Board in its oversight of (1) the integrity of the
Company's financial statements; (2) the Company's compliance with
legal and regulatory requirements; and (3) the performance of the
Company's internal audit function;
B. To interact directly with and evaluate the performance of the
independent auditors, including to determine whether to engage or
dismiss the independent auditors and to monitor the independent
auditors' qualifications and independence; and
C. To prepare the report required by the rules of the Securities and
Exchange Commission (the "SEC") to be included in the Company's
proxy statement.
Although the Committee has the powers and responsibilities set forth in
this Charter, the role of the Committee is oversight. The members of the
Committee are not full-time employees of the Company and may or may not
be accountants or auditors by profession or experts in the fields of
accounting or auditing and, in any event, do not serve in such capacity.
Consequently, it is not the duty of the Committee to conduct audits, to
independently verify management's representations, or to determine that
the Company's financial statements are complete and accurate, prepared in
accordance with generally accepted accounting principles ("GAAP"), or
fairly present the financial condition, results of operations, and cash
flows of the Company in accordance with GAAP. These are the
responsibilities of management and the independent auditors. The
Committee's considerations and discussions with management and the
independent auditors do not assure that the Company's financial
statements are presented in accordance with GAAP, that the audit of the
Company's financial statements has been carried out in accordance with
generally accepted auditing standards, or that the Company's independent
auditors are in fact "independent."
II. Membership
A. The Committee shall be composed of at least three directors, each of
whom must be independent. A director shall qualify as independent if
he or she meets the independence requirements of the SEC and of the
New York Stock Exchange ("NYSE").
B. All members of the Committee must be financially literate or become
financially literate within a reasonable time after appointment to
the Committee. At least one member shall have accounting or related
financial management expertise. To the extent possible, at least one
member of the Committee shall be a "audit committee financial
expert" as that term is defined by the SEC.
C. The members of the Committee shall be appointed by a majority of the
Board for one-year terms. The Board shall designate, one member of
the Committee to serve as Chairperson. The members of the Committee
shall serve until their resignation, retirement, or removal by the
Board or until their successors shall be appointed. No member of the
Committee shall be removed except by majority vote of the
independent directors of the full Board then in office.
D. No member of the Committee may serve simultaneously on the audit
committees of more than three public companies without a specific
Board determination that such simultaneous service will not impair
the ability of such Committee member to serve on the Committee.
A-1
III. Meetings and Procedures
A. The Committee shall meet as often as it may deem necessary and
appropriate in its judgment, but in no event less than four times
per year. A majority of the members of the Committee shall
constitute a quorum.
B. The Committee shall meet with the independent auditors, the senior
personnel performing the Company's internal audit function, and
management in separate meetings, as often as it deems necessary and
appropriate in its judgment.
C. The Chairperson of the Committee or a majority of the members of the
Committee may call a special meeting of the Committee.
D. The Committee may request that any directors, officers, or employees
of the Company, or other persons whose advice and counsel are sought
by the Committee, attend any meeting to provide such information as
the Committee requests.
E. The Committee shall fix its own rules of procedure, which shall be
consistent with the Bylaws of the Company and this Charter.
F. The Committee shall report to the Board on the matters discussed at
each meeting of the Committee, including describing all actions
taken by the Committee at the meeting.
G. The Committee shall keep written minutes of its meetings, which
minutes shall be maintained with the books and records of the
Company.
H. The Committee may delegate authority to one or more members of the
Committee where appropriate, but no such delegation shall be
permitted if the authority is required by a law, regulation, or
listing standard to be exercised by the Committee as a whole.
I. The Committee shall have the authority to obtain advice and
assistance from internal and external legal, accounting and other
advisors, and the Company shall provide appropriate funding for the
Committee to retain any such advisors without requiring the
Committee to seek Board approval.
IV. Statement of Policy
The Committee and each member of the Committee individually, shall be
entitled to rely in good faith on information, opinions, reports or statements
or other information prepared or presented to them by (i) members of the
Company's management and other employees of the Company and its affiliates,
whom such member believes to be reliable and competent in the matters
presented, and (ii) counsel, certified public accountants or other persons as
to matters which the member believes to be within the professional competence
of such person.
V. Duties and Responsibilities
A. Financial Reporting Process
1. The Committee shall review and discuss with management and the
independent auditors the annual audited financial statements to
be included in the Company's annual report on Form 10-K, the
quarterly financial statements to be included in the Company's
Form 10-Qs, the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," and any other financial disclosures to be included
in SEC filings prior to their release. This discussion should
include, where appropriate, a discussion about the Company's
accounting principles, critical accounting estimates, financial
statement presentation, significant financial reporting issues
and judgments (including off-balance sheet structures and the
use of pro forma or non-GAAP financial information), the
adequacy of the Company's internal controls, and any regulatory
and accounting initiatives, correspondence with regulators, or
published reports that raise material issues with respect to,
or that could have a significant effect on, the Company's
financial statements.
2. The Committee shall recommend to the Board whether the audited
financial statements should be included in the Company's Form
10-K.
A-2
3. The Committee shall review earnings press releases prior to
their release, as well as the types of financial information
and earnings guidance provided to analysts and rating agencies.
4. The Committee shall prepare the report required by the rules of
the SEC to be included in the Company's annual proxy statement.
B. Risks and Control Environment
1. The Committee shall discuss periodically with management the
Company's policies and guidelines regarding risk assessment and
risk management, as well as the Company's major financial risk
exposures and the steps that management has taken to monitor
and control such exposures.
2. The Committee shall meet periodically with the senior personnel
performing the internal audit function, the general counsel's
office, and the independent auditors to review the Company's
policies and procedures regarding disclosures that may impact
the financial statements and compliance with applicable laws
and regulations and the Company's Code of Business Ethics and
Internal Disclosure Procedures ("Code").
3. The Committee shall oversee the Company's internal controls and
procedures for financial reporting, and internal controls
relating to the authorization of transactions and the
safeguarding and control of assets, and, where applicable,
shall oversee the changes in internal controls intended to
address any significant deficiencies in the design or operation
of internal controls or material weaknesses therein and any
fraud involving management or other employees that are reported
to the Committee. In addition, the Committee shall review and
discuss the annual internal control report of management and
the independent auditors' report on, and attestation of,
management's evaluation of internal controls and procedures for
financial reporting, when those reports are required by SEC
rules.
C. Independent Auditors
1. The Committee shall have the sole authority to retain, set
compensation and retention terms for, terminate, oversee
(including the resolutions of any disagreements between the
management of the Company and the independent auditors), and
evaluate the activities of the Company's independent auditors.
The independent auditors shall report directly to the
Committee. The Company shall provide for appropriate funding,
as determined by the Committee, for payment of compensation to
the independent auditors.
2. The Committee shall review and approve in advance the retention
of the independent auditors for the performance of all audit
and lawfully permitted non-audit services and the fees for such
services. Pre-approval of lawfully permitted non-audit services
may be pursuant to appropriate policies and procedures
established by the Committee for the pre-approval of such non-
audit services, provided that any such pre-approved non-audit
services are reported to the full Committee at its next
scheduled meeting.
3. Prior to initiation of the audit, the Committee shall meet with
the independent auditors to discuss the planning and staffing
of the audit, including the impact of applicable rotation
requirements and other independence rules on the staffing.
4. The Committee shall, at least annually, obtain and review a
written report by the independent auditors describing: (i) the
independent auditors' internal quality-control procedures; (ii)
any material issues raised by the most recent internal quality-
control review, or peer review, of the firm, or by any inquiry
or investigation by governmental or professional authorities or
a private sector regulatory board, within the preceding five
years, respecting one or more independent audits performed by
the firm, and any steps taken to deal with any such issues; and
(iii) in order to assess the firm's independence, all direct
and indirect relationships between the firm and the Company.
5. The Committee shall review periodically any reports prepared by
the independent auditors and provided to the Committee relating
to significant financial reporting issues and judgments
A-3
including, among other things, the Company's selection,
application, and disclosure of critical accounting policies and
practices, all alternative treatments, assumptions, estimates
or methods that have been discussed with management, including
the ramifications of such treatments and the treatment
preferred by the independent auditors, and any other material
written communications between the independent auditors and
management, such as any management letter or schedule of
unadjusted differences.
6. The Committee shall discuss with the independent auditors any
audit problems or difficulties, including any restrictions on
the scope of the independent auditors' activities or on access
to requested information, and management's response to same,
shall discuss with the independent auditors any other matters
required to be brought to its attention under auditing
standards (e.g., SAS 61 and Independent Standards Board No. 1),
and shall resolve any disagreements between the independent
auditors and management.
7. The Committee shall discuss with the independent auditors any
auditing or accounting issues concerning the Company as to
which the independent auditors communicated with their national
office.
8. After reviewing the reports from the independent auditors and
the independent auditors' work, the Committee will conduct an
annual evaluation of the independent auditors' performance and
independence, including considering whether the independent
auditors' quality controls are adequate. This evaluation also
shall include the review and evaluation of the audit engagement
team, including the lead partner. In making its evaluation, the
Committee shall take into account the opinions of management
and the senior personnel performing the Company's internal
audit function. The Committee shall present its conclusions
with respect to the evaluation of the independent auditors to
the Board.
9. The Committee shall set policies for the hiring by the Company
of employees or former employees of the independent auditors in
conformity with applicable law and SEC rules.
D. Internal Audit Function
1. The Committee shall oversee the activities, organizational
structure, and qualifications of the persons performing the
internal audit function.
2. The Committee shall review and approve the appointment and
replacement of the senior personnel performing the internal
audit function.
3. The Committee shall review and approve the annual internal
audit plan of, and any special projects undertaken by, the
personnel performing the internal audit function.
4. The Committee shall discuss with the personnel performing the
internal audit function any changes to, and the implementation
of, the internal audit plan and any special projects and
discuss the results of the internal audits and special
projects.
5. The Committee shall review any significant reports to
management prepared by the internal audit department and
management's responses.
E. Reports
The Committee shall make regular reports to the Board on its
activities, including reviewing any issues that arise respecting the
quality and integrity of the Company's public reporting, the
Company's compliance with legal and regulatory requirements, the
performance and independence of the Company's independent auditors,
the performance of the Company's internal audit department, and the
effectiveness of the Company's disclosure controls and procedures.
F. Other Matters
1. As to the procedures established by the Committee for (i) the
receipt, retention, and treatment of complaints received by the
Company regarding accounting, internal accounting controls, or
auditing matters, and (ii) the confidential, anonymous
submission by Company employees of
A-4
concerns regarding questionable accounting or auditing matters
as presently set forth in the Internal Disclosure Procedures
("Procedures") portion of the Company's Code, the Committee
shall periodically review and reassess the adequacy of such
Procedures.
2. The Committee shall discuss with management of the Company and
the Company's independent auditors any significant or material
correspondence with regulators or government agencies, and any
employee complaints and published reports that raise material
issues regarding the Company's financial statements or
accounting policies and shall review management's responses to
such correspondence, complaints or reports.
3. The Committee shall review and reassess the adequacy of this
Charter annually and recommend any proposed changes to the
Board for its approval.
4. The Committee shall maintain free and open communication with
all other members of the Board, the Company's management and
the members of its internal audit department, and the
independent auditors.
5. The Committee shall perform any other activities consistent
with this Charter, the Company's Certificate of Incorporation,
the Company's Bylaws, and governing law, as the Committee or
the Board may deem necessary or appropriate.
6. The Committee shall have the right to take such other actions
as are deemed necessary and appropriate to exercise its
responsibilities and authority pursuant to the Sarbanes-Oxley
Act of 2002, the rules of the SEC and the requirements of the
New York Stock Exchange.
A-5
Appendix B
CHARTER
OF THE
HUMAN RESOURCES COMMITTEE
OF
THE BOARD OF DIRECTORS OF
CSS INDUSTRIES, INC. (the "COMPANY")
(as adopted on April 24, 2003)
1. Mission Statement
The Human Resources Committee ("Committee") of the Board of Directors of
the Company oversees the development and implementation of compensation
and benefit policies, plans and programs designed to encourage
enhancement of the Company's profitability, and consequently stockholder
value. The Committee evaluates the compensation of the senior management
of the Company and its affiliates and seeks to assure that they are
compensated in a manner designed to attract, retain and reward them
consistent with the compensation strategy of the Company, internal equity
considerations, competitive practice, and the requirements of the
appropriate regulatory bodies and other duties relating to human
resources matters as requested by the Chief Executive Officer of the
Company or as otherwise deemed appropriate. The Committee also shall
communicate to stockholders regarding the Company's compensation policies
and the reasoning behind such policies as required by the Securities and
Exchange Commission.
2. Membership and Qualification
The Committee shall consist of three or more "Independent Directors"*.
The Committee members shall be elected annually by the Board of Directors
for terms of one year, or until their successors shall be duly elected
and qualified. A Committee Chairman shall be designated by the Board of
Directors.
In addition to satisfying the requirements necessary to be Independent
Directors, each member of the Committee also shall satisfy all
requirements necessary from time to time to be "disinterested directors"
under SEC Rule 16b-3 and qualified "outside directors" under Section
163(m) of the Internal Revenue Code and related regulations, all as
amended from time to time.
3. Meetings and Other Actions
The Committee will meet at such times as may be necessary to carry out
its responsibilities. Meetings may be called by the Chairman of the
Committee, the Chairman of the Board and/or the Chief Executive Officer
of the Company. All meetings of and other actions by the Committee shall
be held and taken pursuant to the Bylaws of the Company. Reports of
meetings of and actions taken at meetings or by consent by the Committee
shall be made by or on behalf of the Committee Chairman.
4. Goals, Responsibilities and Authority
In carrying out its mission, the Committee shall have the following
responsibilities and authority (it being understood that the Committee
may condition its approval of any compensation on Board ratification to
the extent so required to comply with applicable tax law such as Section
162(m) of the Internal Revenue Service):
---------------
* An "Independent Director" is one who is not and has not been during the
past five years: (a) an employee of the Company or any of its affiliates;
(b) affiliated with or employed by a present or former independent
auditor of the Company or any of its affiliates; (c) part of an
interlocking directorship in which an executive officer of the Company
serves on a committee with responsibilities similar to that of the
Committee of another publicly held entity that employs such director; (d)
is an immediate family member of anyone who has been an officer of the
Company or any of its affiliates or had a relationship described in
clause (b) or (c) above; or has been determined by the Company's Board of
Directors not to have any other material relationship with or to the
Company or its management, directly or indirectly; however, ownership of
a significant amount of the Company's capital stock does not preclude a
determination of independence.
B-1
o Review from time to time, modify if necessary, and approve: (a) the
Company's corporate goals and objectives relevant to executive
compensation; and (b) the structure of the Company's executive
compensation to ensure that such structure is appropriate to achieve
the Company's objectives of rewarding each member of senior
management and other management personnel of the Company and of its
affiliates appropriately for their contributions to the Company's
growth and profitability and the Company's other goals and linking
the interests of the senior management of the Company and of its
affiliates to the long-term interests of the Company's stockholders
through long and short term incentives and features that include
downside risk as well as upside potential.
o Annually evaluate the compensation (and performance relative to
compensation) of the Chief Executive Officer of the Company and
determine the amounts and individual elements of total compensation
for the Chief Executive Officer consistent with the Company's
corporate goals and objectives and communicate in the annual
Committee Report to the stockholders of the Company the factors and
criteria on which the Chief Executive Officer's compensation for the
then last fiscal year was based, including the relationship of the
Company's performance to the chief executive officer's compensation.
In determining the long-term incentive component of the Chief
Executive Officer's compensation, the Committee should consider the
Company's performance and relative stockholder return, the value of
similar incentive awards to Chief Executive Officers at comparable
companies, and the awards given to the Company's Chief Executive
Officer in prior years.
o Annually evaluate (in conjunction with the Chief Executive Officer)
and approve the compensation (and performance relative to
compensation) of the other executive officers and members of the
senior management of the Company and of its affiliates, approve the
individual elements of total compensation for each such person and
communicate in the annual Committee Report to stockholders contained
in the Proxy Statement the specific relationship of the Company's
performance to executive compensation.
o Periodically evaluate the terms and administration of the Company's
annual and long-term incentive plans to assure that they are
structured and administered in a manner consistent with the
Company's goals and objectives as to participation in such plans,
target annual incentive awards, corporate financial goals, actual
awards paid to the Company's executive officers and other members of
the senior management of the Company and its affiliates and total
funds reserved for payment under the compensation plans.
o Approve revisions to the Company's executive salary range structure,
annual salary increase guidelines, and discuss all such compensation
arrangements with the Chief Executive Officer of the Company.
o Periodically evaluate the employee benefit programs of the Company
and those of its affiliates and approve any significant changes
therein and determine when it is necessary (based on advice of
counsel) or otherwise desirable to submit any such changes to a vote
of the full Board and/or the Company's stockholders.
o Perform such other duties and responsibilities as may be assigned to
the Committee, from time to time by the Board of Directors of the
Company or as designated in any compensation or other benefit plan
document.
5. Additional Resources
The Committee shall have the right to use reasonable amounts of time of
the Company's internal audit staff and independent auditors, internal and
outside legal counsel and other internal staff and also shall have the
right to hire independent compensation experts, counsel and other
consultants to assist and advise the Committee in connection with its
responsibilities. The Committee shall keep the Company's Chief Financial
Officer advised as to the general range of anticipated expenses for such
outside consultants.
B-2
ANNUAL MEETING OF STOCKHOLDERS OF
CSS INDUSTRIES, INC.
August 6, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
| |
v Please detach and mail in the envelope provided. v
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
| | 40800000000000000000 8 080603
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
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1.Election of Directors: THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL
NOMINEES".
NOMINEES:
| | FOR ALL NOMINEES James H. Bromley
Stephen V. Dubin
David J.M. Erskine
| | WITHHOLD AUTHORITY Jack Farber
FOR ALL NOMINEES Leonard E. Grossman
James E. Ksansnak
| | FOR ALL EXCEPT Rebecca C. Matthias
(See instructions below) Michael L. Sanyour
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and write the nominee name(s) below:
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________________________________________________________________________________
________________________________________________________________________________
To change the address on your account, please check the box at right
and indicate your new address in the address space above. Please note
that changes to the registered name(s) on the account may not be
submitted via this method. | |
________________________________________________________________________________
Signature of the Stockholder_________________________Date________Signature of the Stockholder_________________________Date__________
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CSS INDUSTRIES, INC.
The undersigned hereby appoints Jack Farber, Leonard E. Grossman and
Michael L. Sanyour, and each of them acting singly, proxies of the undersigned
stockholder with full power of substitution to each of them, to vote all shares
of Common Stock of CSS Industries, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of the Company to be held at The Rittenhouse, 210 West Rittenhouse
Square, Philadelphia, PA 19103, on Wednesday, August 6, 2003, at 9:30 a.m.
(local time) and any adjournments thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder and in the discretion of the holders of
this Proxy upon such other matters as may properly come before the annual
meeting or any adjournments thereof. With respect to the election of directors,
where a box is not completed, this Proxy will be voted "FOR ALL NOMINEES."
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN AND DATE THIS PROXY
ON THE REVERSE SIDE AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side)
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