CSS Industries, Inc. (NYSE:CSS) announced today its results of operations for the first quarter ended June 30, 2010. Sales for the first quarter of fiscal 2011 were basically flat versus the first quarter of last year, declining 0.7% to $53,288,000 from $53,677,000 in fiscal 2010. The net loss for the first quarter of fiscal 2011 was $5,737,000, or $0.59 per share, versus a net loss of $4,490,000, or $0.47 per share, in the first quarter of last fiscal year. The Company’s highly seasonal orientation has historically resulted in operating losses in the first and fourth quarters of the fiscal year and operating profits in the second and third quarters.

First Quarter Results

Sales for the first quarter of fiscal 2011 benefitted from the timing of earlier Halloween shipments this fiscal year which were offset by a decrease in our sales of C.R. Gibson branded infant products. The net loss for the first quarter of fiscal 2011 was negatively impacted by an increase in cost of goods sold and higher selling, general and administrative (SG&A) expenses. The increased cost of goods sold were primarily driven by higher cost of ocean freight, royalties and testing fees largely associated with the earlier Halloween shipments. SG&A expenses increased year over year due to higher selling and payroll expenses in the first quarter of fiscal 2011.

Management Comments

“While the challenging economic environment continued into the beginning of fiscal 2011, we are pleased with the earlier Halloween shipments during the first quarter and we are working hard to replace the lower sales of our infant products,” said Christopher J. Munyan, CSS’ President and CEO. “We started our seasonal production earlier in fiscal 2011 than last fiscal year which drove an approximately $6,300,000 increase in net cash used in operating activities. We believe this earlier production of inventory will facilitate our seasonal customer shipments during the second and third quarters of fiscal 2011. Looking forward, we believe that improved operational efficiencies and processes that we have already implemented will benefit our remaining nine months of fiscal 2011. Additionally, we continue to focus on cash flow generation, and we expect that free cash flow (defined as cash flow from operations reduced by purchases of property, plant and equipment) for fiscal 2011 will be at least $25,000,000.”