Crown Crafts, Inc. (NASDAQ:CRWS) Q3 2021 Earnings Conference Call February 10, 2021 2:00 PM ET Company Participants Olivia Elliott - President & COO Randall Chestnut - President & CEO Conference Call Participants Linda Bolton-Weiser - D.A. Davidson & Co. Operator Hello, ladies and gentlemen, and welcome to the Crown Crafts, Inc. investor conference call. Your host for today's call is Mr. Randall Chestnut, Chairman and Chief Executive Officer. [Operator Instructions]. Any reproduction of this call in whole o ...

[PART I – FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of income, statements of changes in shareholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, financing arrangements, goodwill, intangible assets, inventories, leases, stock-based compensation, related party transactions, and subsequent events [Condensed Consolidated Balance Sheets](index=2&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section presents the company's financial position, detailing assets, liabilities, and shareholders' equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | December 27, 2020 (in thousands) | March 29, 2020 (in thousands) | | :---------------------------------- | :------------------------------- | :---------------------------- | | Cash and cash equivalents | $3,658 | $282 | | Accounts receivable (net) | $18,249 | $17,803 | | Inventories | $22,842 | $17,732 | | Total current assets | $46,941 | $37,041 | | Total Assets | $65,806 | $57,173 | | Accounts payable | $8,891 | $2,972 | | Dividends payable | $3,380 | $813 | | Total current liabilities | $17,192 | $6,479 | | Long-term debt | $524 | $2,578 | | Total Liabilities | $23,365 | $14,737 | | Retained Earnings | $2,753 | $1,108 | | Total Shareholders' Equity | $42,441 | $42,436 | [Unaudited Condensed Consolidated Statements of Income](index=3&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) This section outlines the company's financial performance over periods, including net sales, gross profit, and net income Three-Month Periods Ended (in thousands) | Metric | December 27, 2020 (in thousands) | December 29, 2019 (in thousands) | Change ($k) | Change (%) | | :--------------------------------- | :------------------------------- | :------------------------------- | :---------- | :--------- | | Net sales | $19,476 | $18,587 | $889 | 4.8% | | Cost of products sold | $13,323 | $12,766 | $557 | 4.4% | | Gross profit | $6,153 | $5,821 | $332 | 5.7% | | Marketing and administrative expenses | $3,420 | $3,416 | $4 | 0.1% | | Income from operations | $2,733 | $2,405 | $328 | 13.6% | | Income before income tax expense | $2,723 | $2,377 | $346 | 14.6% | | Income tax expense | $582 | $282 | $300 | 106.4% | | Net income | $2,141 | $2,095 | $46 | 2.2% | | Earnings per share - basic and diluted | $0.21 | $0.21 | $0.00 | 0.0% | Nine-Month Periods Ended (in thousands) | Metric | December 27, 2020 (in thousands) | December 29, 2019 (in thousands) | Change ($k) | Change (%) | | :--------------------------------- | :------------------------------- | :------------------------------- | :---------- | :--------- | | Net sales | $57,340 | $53,089 | $4,251 | 8.0% | | Cost of products sold | $39,070 | $36,848 | $2,222 | 6.0% | | Gross profit | $18,270 | $16,241 | $2,029 | 12.5% | | Marketing and administrative expenses | $10,602 | $10,344 | $258 | 2.5% | | Income from operations | $7,668 | $5,897 | $1,771 | 30.0% | | Income before income tax expense | $7,653 | $5,895 | $1,758 | 29.8% | | Income tax expense | $1,810 | $942 | $868 | 92.1% | | Net income | $5,843 | $4,953 | $890 | 18.0% | | Earnings per share - basic and diluted | $0.57 | $0.49 | $0.08 | 16.3% | [Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity](index=4&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20SHAREHOLDERS%20%27%20EQUITY) This section details changes in the company's equity, including net income, share issuance, and dividends Shareholders' Equity Changes (Nine-Month Period Ended December 27, 2020, in thousands) | Item | Amount (in thousands) | | :----------------------------------- | :-------------------- | | Balances - March 29, 2020 | $42,436 | | Issuance of shares | $521 | | Stock-based compensation | $289 | | Acquisition of treasury stock | $(2,450) | | Net income | $5,843 | | Dividend declared on common stock | $(4,198) | | Balances - December 27, 2020 | $42,441 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section summarizes cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary (Nine-Month Periods Ended, in thousands) | Cash Flow Activity | December 27, 2020 (in thousands) | December 29, 2019 (in thousands) | | :--------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $8,079 | $7,187 | | Net cash used in investing activities | $(528) | $(352) | | Net cash used in financing activities | $(4,175) | $(6,937) | | Net increase (decrease) in cash and cash equivalents | $3,376 | $(102) | | Cash and cash equivalents at beginning of period | $282 | $143 | | Cash and cash equivalents at end of period | $3,658 | $41 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=6&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations of the company's accounting policies and financial statement items [Note 1 – Summary of Significant Accounting Policies](index=6&type=section&id=Note%201%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's key accounting principles, fiscal year, revenue recognition, and segment information - The Company's fiscal year ends on the Sunday nearest to or on March 31. Fiscal year 2021 represents the 52-week period ending March 28, 2021[21](index=21&type=chunk) - Revenue is recognized upon the satisfaction of all contractual performance obligations and the transfer of control of products to the customer, net of anticipated returns[26](index=26&type=chunk)[27](index=27&type=chunk) - The Company operates primarily in one principal segment: infant and toddler products, which include bedding, bibs, soft bath products, disposable products, developmental and bath toys, and accessories[34](index=34&type=chunk) - The Company assigns the majority of its trade accounts receivable to CIT under factoring agreements to reduce credit loss exposure. As of December 27, 2020, **$16.9 million** was due from CIT under these agreements[30](index=30&type=chunk)[31](index=31&type=chunk) - The Company intends to adopt ASU No. 2016-13 (Financial Instruments – Credit Losses) effective April 3, 2023, but does not anticipate a significant impact due to its factoring agreements[55](index=55&type=chunk) [Note 2 – Financing Arrangements](index=11&type=section&id=Note%202%20%E2%80%93%20Financing%20Arrangements) This note details the company's credit facility and Paycheck Protection Program (PPP) loan arrangements - The Company's credit facility includes a revolving line of credit with CIT of up to **$26.0 million**, maturing on July 11, 2022. As of December 27, 2020, there was no balance owed, and **$26.0 million** was available[60](index=60&type=chunk)[61](index=61&type=chunk) - The Company received a **$1,963,800** Paycheck Protection Program (PPP) loan on April 19, 2020, at **1.0% interest**, maturing April 20, 2022. An application for full forgiveness was submitted on October 15, 2020[63](index=63&type=chunk)[67](index=67&type=chunk) - As of December 27, 2020, **$1.4 million** of the PPP loan was classified as a current liability, and **$524,000** as long-term debt, based on the assumption that monthly installments will commence in February 2021[67](index=67&type=chunk) [Note 3 – Goodwill](index=12&type=section&id=Note%203%20%E2%80%93%20Goodwill) This note reports the company's goodwill balance and recent impairment assessment - Goodwill amounted to **$7.1 million** as of December 27, 2020, net of accumulated impairment charges of **$22.9 million**[69](index=69&type=chunk) - The annual goodwill impairment measurement as of March 30, 2020, concluded that the goodwill of the Company's reporting units was not impaired[71](index=71&type=chunk) [Note 4 – Other Intangible Assets](index=13&type=section&id=Note%204%20%E2%80%93%20Other%20Intangible%20Assets) This note provides a breakdown of the company's intangible assets and associated amortization expenses Other Intangible Assets and Amortization Expense (in thousands) | Category | Gross Amount (Dec 27, 2020, $k) | Accumulated Amortization (Dec 27, 2020, $k) | 3-Month Amortization Expense (Dec 27, 2020, $k) | 9-Month Amortization Expense (Dec 27, 2020, $k) | | :----------------------- | :------------------------------ | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Tradename and trademarks | $3,667 | $1,930 | $61 | $183 | | Developed technology | $1,100 | $376 | $28 | $83 | | Non-compete covenants | $458 | $337 | $19 | $59 | | Patents | $1,601 | $937 | $13 | $48 | | Customer relationships | $7,374 | $5,639 | $72 | $223 | | **Total** | **$14,200** | **$9,219** | **$193** | **$596** | [Note 5 – Inventories](index=13&type=section&id=Note%205%20%E2%80%93%20Inventories) This note details the composition of the company's inventory, including raw materials, work in process, and finished goods Major Classes of Inventory (in thousands) | Category | December 27, 2020 | March 29, 2020 | | :--------------- | :---------------- | :------------- | | Raw Materials | $443 | $597 | | Work in Process | $31 | $23 | | Finished Goods | $22,368 | $17,112 | | **Total inventory** | **$22,842** | **$17,732** | [Note 6 – Leases](index=13&type=section&id=Note%206%20%E2%80%93%20Leases) This note outlines the company's operating lease costs, remaining lease term, and discount rate Operating Lease Costs (in thousands) | Category | 3-Month Ended Dec 27, 2020 | 3-Month Ended Dec 29, 2019 | 9-Month Ended Dec 27, 2020 | 9-Month Ended Dec 29, 2019 | | :--------------------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Cost of products sold | $422 | $382 | $1,269 | $957 | | Marketing and administrative expenses | $50 | $53 | $152 | $153 | | **Total operating lease costs** | **$472** | **$435** | **$1,421** | **$1,110** | - As of December 27, 2020, the weighted-average remaining lease term for operating leases is **2.9 years**, and the weighted-average discount rate is **3.67%**[75](index=75&type=chunk) [Note 7 – Stock-based Compensation](index=14&type=section&id=Note%207%20%E2%80%93%20Stock-based%20Compensation) This note details stock-based compensation expenses, stock option activity, and unrecognized compensation Stock-based Compensation Expense (in thousands) | Period | 3-Month Ended Dec 27, 2020 | 3-Month Ended Dec 29, 2019 | 9-Month Ended Dec 27, 2020 | 9-Month Ended Dec 29, 2019 | | :----------------------- | :------------------------- | :------------------------- | :------------------------- | :------------------------- | | Total Stock-based Compensation Expense | $103 | $79 | $289 | $219 | Stock Option Activity (Nine-Month Periods Ended) | Metric | December 27, 2020 | December 29, 2019 | | :--------------------------- | :---------------- | :---------------- | | Options Outstanding at End of Period | 532,500 | 517,500 | | Weighted-Average Exercise Price | $6.71 | $6.86 | | Options Granted | 110,000 | 125,000 | | Options Exercised | (95,000) | (10,000) | | Options Forfeited | - | (55,000) | - As of December 27, 2020, total unrecognized stock option compensation expense was **$58,000**, to be recognized over a weighted-average period of **9.3 months**[84](index=84&type=chunk) - As of December 27, 2020, total unrecognized compensation expense related to non-vested stock grants was **$336,000**, to be recognized over a weighted-average vesting term of **9.2 months**[91](index=91&type=chunk) [Note 8 – Related Party Transaction](index=17&type=section&id=Note%208%20%E2%80%93%20Related%20Party%20Transaction) This note discloses a common stock repurchase from the company's Chief Executive Officer - On December 16, 2020, the Company purchased **250,000 shares** of its common stock from its CEO, E. Randall Chestnut, at a price of **$7.5435 per share**[92](index=92&type=chunk) [Note 9 – Subsequent Events](index=17&type=section&id=Note%209%20%E2%80%93%20Subsequent%20Events) This note describes significant events occurring after the reporting period, including a tax benefit - On January 10, 2021, the Company's California consolidated income tax return for fiscal year ended April 3, 2016, became closed to examination. This is expected to result in a discrete income tax benefit of **$233,000** and a credit to interest expense of **$107,000** in the three-month period ending March 28, 2021[93](index=93&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=17&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition, liquidity, capital resources, and results of operations, including forward-looking statements, a description of the business, and a detailed analysis of revenue, gross profit, expenses, and cash flows, with a focus on the impact of the COVID-19 pandemic [FORWARD-LOOKING INFORMATION](index=17&type=section&id=FORWARD-LOOKING%20INFORMATION) This section highlights risks and uncertainties associated with forward-looking statements, including COVID-19 impacts - Forward-looking statements involve known and unknown risks and uncertainties, including the impact of the COVID-19 pandemic, general economic conditions, changing competition, changes in the retail environment, dependence on third-party suppliers (especially in China), and reliance on third-party licenses[95](index=95&type=chunk) [DESCRIPTION OF BUSINESS](index=18&type=section&id=DESCRIPTION%20OF%20BUSINESS) This section describes the company's operations in the infant and toddler products market, sales channels, and competitive landscape - The Company operates in the infant, toddler, and juvenile products segment, marketing products under Company-owned trademarks, licensed trademarks, and as private label goods[97](index=97&type=chunk) - Sales are made directly to various retailers (mass merchants, chain stores, specialty stores, online) and directly to consumers through www.babybedding.com[97](index=97&type=chunk) - The industry is highly competitive, with competition based on quality, design, price, brand recognition, service, and packaging[99](index=99&type=chunk) - Most products are produced by foreign contract manufacturers, primarily in China, with some domestic production[100](index=100&type=chunk) [RESULTS OF OPERATIONS](index=18&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's net sales, gross profit, expenses, and tax rates for the reported periods Net Sales Performance (in thousands) | Period | Net Sales (in thousands) | Change ($k) | Change (%) | | :--------------------------------- | :----------------------- | :---------- | :--------- | | 3-Month Ended Dec 27, 2020 | $19,476 | $889 | 4.8% | | 3-Month Ended Dec 29, 2019 | $18,587 | | | | 9-Month Ended Dec 27, 2020 | $57,340 | $4,251 | 8.0% | | 9-Month Ended Dec 29, 2019 | $53,089 | | | - The increase in net sales was driven by higher sell-through at major retailers, partially offset by declines at certain retailers impacted by the COVID-19 pandemic[103](index=103&type=chunk) Gross Profit Performance (in thousands) | Period | Gross Profit (in thousands) | % of Net Sales | | :--------------------------------- | :-------------------------- | :------------- | | 3-Month Ended Dec 27, 2020 | $6,153 | 31.6% | | 3-Month Ended Dec 29, 2019 | $5,821 | 31.3% | | 9-Month Ended Dec 27, 2020 | $18,270 | 31.9% | | 9-Month Ended Dec 29, 2019 | $16,241 | 30.6% | - Gross profit increased due to higher net sales and a more favorable customer and product mix[104](index=104&type=chunk) Marketing and Administrative Expenses (in thousands) | Period | Amount | % of Net Sales | | :--------------------------------- | :----- | :------------- | | 3-Month Ended Dec 27, 2020 | $3,420 | 17.6% | | 3-Month Ended Dec 29, 2019 | $3,416 | 18.4% | | 9-Month Ended Dec 27, 2020 | $10,602 | 18.5% | | 9-Month Ended Dec 29, 2019 | $10,344 | 19.5% | - The nine-month increase in marketing and administrative expenses was primarily due to higher outside services (**$318,000**) and advertising (**$138,000**), partially offset by lower travel expenses (**$120,000**) and amortization (**$45,000**)[105](index=105&type=chunk) - The estimated annual effective tax rate (ETR) from continuing operations was **23.7%** for the nine-month period ended December 27, 2020, compared to **16.0%** for the prior year period[106](index=106&type=chunk)[112](index=112&type=chunk) [FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES](index=20&type=section&id=FINANCIAL%20POSITION%2C%20LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's cash flows, credit facility, and ability to fund future operations - Net cash provided by operating activities increased to **$8.1 million** for the nine-month period ended December 27, 2020, from **$7.2 million** in the prior year, driven by higher net income and favorable changes in accounts payable and accrued liabilities[114](index=114&type=chunk) - Net cash used in investing activities increased to **$528,000** for the nine-month period ended December 27, 2020, primarily due to higher capital expenditures[115](index=115&type=chunk) - Net cash used in financing activities decreased to **$4.2 million** for the nine-month period ended December 27, 2020, from **$6.9 million** in the prior year, mainly due to lower net repayments under the revolving line of credit and proceeds from the PPP loan, partially offset by higher stock repurchases[116](index=116&type=chunk) - As of December 27, 2020, there was no balance owed on the revolving line of credit, with **$26.0 million** available[117](index=117&type=chunk) - The Company continues to monitor the impact of the COVID-19 pandemic but believes its anticipated cash flow from operations and available credit are sufficient to fund requirements for at least the next 12 months[119](index=119&type=chunk)[120](index=120&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=21&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to various market risks, including interest rate risk, commodity rate risk, and market concentration risk, providing qualitative and quantitative disclosures [INTEREST RATE RISK](index=21&type=section&id=INTEREST%20RATE%20RISK) This section addresses the company's exposure to interest rate fluctuations on its debt - The Company has exposure to interest rate risk related to its floating rate debt, but there was no outstanding balance on this debt as of December 27, 2020[124](index=124&type=chunk) [COMMODITY RATE RISK](index=21&type=section&id=COMMODITY%20RATE%20RISK) This section discusses risks related to changes in commodity prices and currency exchange rates affecting product costs - The Company's primary commodity price risk relates to changes in the prices of cotton, oil, and labor in China, which are key inputs for its products[125](index=125&type=chunk) - A strengthening Chinese currency against the U.S. dollar could increase the cost of finished goods, and the Company may not be able to proportionately increase product prices[125](index=125&type=chunk) [MARKET CONCENTRATION RISK](index=21&type=section&id=MARKET%20CONCENTRATION%20RISK) This section highlights the company's dependence on key customers and licensed products - The Company's financial results are highly dependent on sales to its top two customers, which accounted for approximately **62%** of gross sales in fiscal year 2020[126](index=126&type=chunk) - Licensed products constituted **40%** of gross sales in fiscal year 2020, with **30%** associated with license agreements with Walt Disney Company affiliates. The loss of these licenses could materially impact results[126](index=126&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=21&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes to internal control over financial reporting during the quarter - The Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of December 27, 2020[127](index=127&type=chunk) - No changes in internal control over financial reporting were identified during the three-month period ended December 27, 2020, that materially affected or are reasonably likely to materially affect ICFR[128](index=128&type=chunk) [PART II - OTHER INFORMATION](index=21&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section includes legal proceedings, risk factors, equity sales, and other required disclosures [ITEM 1. LEGAL PROCEEDINGS](index=21&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section states that the company is involved in routine legal and regulatory proceedings, none of which are expected to have a material adverse effect on its financial condition, results of operations, or cash flow - The Company is involved in various legal and regulatory proceedings in the ordinary course of business, but none are expected to have a material adverse effect on its financial condition, results of operations, or cash flow[130](index=130&type=chunk) [ITEM 1A. RISK FACTORS](index=21&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section refers to the company's annual report for a comprehensive discussion of risk factors and confirms that there have been no material changes since the last annual report - There have been no material changes to the risk factors disclosed in Item 1A. of Part 1 of the Company's annual report on Form 10-K for the year ended March 29, 2020[131](index=131&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=22&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the company's repurchases of its common stock during the three-month period ended December 27, 2020, specifically noting a purchase from its Chief Executive Officer Issuer Purchases of Equity Securities (Three-Month Period Ended December 27, 2020) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :------------------------------------ | :------------------------------- | :--------------------------- | | November 30, 2020 through December 27, 2020 | 250,000 | $7.5435 | | **Total** | **250,000** | **$7.5435** | - The shares purchased were from E. Randall Chestnut, the Company's Chief Executive Officer, and were not part of publicly announced plans or programs[133](index=133&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=22&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section confirms that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[134](index=134&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=22&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the Company[135](index=135&type=chunk) [ITEM 5. OTHER INFORMATION](index=22&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section indicates that there is no other information to report under this item - No other information is reported under this item[136](index=136&type=chunk) [ITEM 6. EXHIBITS](index=23&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the quarterly report, including corporate governance documents, employment agreements, certifications, and interactive data files in XBRL format - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, Amended and Restated Employment and Severance Protection Agreement with CEO, Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and XBRL formatted financial statements[138](index=138&type=chunk) [SIGNATURE](index=23&type=section&id=SIGNATURE) This section contains the signature of the authorized officer, Olivia W. Elliott, President, Chief Operating Officer, and Chief Financial Officer, confirming the filing of the report - The report was signed by Olivia W. Elliott, President, Chief Operating Officer, and Chief Financial Officer, on February 10, 2021[144](index=144&type=chunk)

PART I – FINANCIAL INFORMATION This section presents unaudited condensed consolidated financial statements and management's discussion of financial condition [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of income, changes in shareholders' equity, and cash flows, along with detailed notes on significant accounting policies, financing arrangements, goodwill, intangible assets, inventories, leases, and stock-based compensation [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheets Data | Metric | Sep 27, 2020 (in thousands) | Mar 29, 2020 (in thousands) | Change (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Cash and cash equivalents | $6,832 | $282 | +$6,550 | | Total current assets | $45,545 | $37,041 | +$8,504 | | Total Assets | $64,417 | $57,173 | +$7,244 | | Accounts payable | $8,054 | $2,972 | +$5,082 | | Total current liabilities | $12,826 | $6,479 | +$6,347 | | Total Shareholders' Equity | $45,507 | $42,436 | +$3,071 | [Unaudited Condensed Consolidated Statements of Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) This statement details revenues, expenses, and net income over specific periods, reflecting profitability Unaudited Condensed Consolidated Statements of Income Data | Metric (3-month) | Sep 27, 2020 (in thousands) | Sep 29, 2019 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Net sales | $21,659 | $18,560 | +$3,099 | +16.7% | | Gross profit | $7,094 | $5,869 | +$1,225 | +20.9% | | Gross profit % of net sales | 32.8% | 31.6% | +1.2 pp | | | Net income | $2,487 | $1,779 | +$708 | +39.8% | | EPS - basic and diluted | $0.24 | $0.18 | +$0.06 | +33.3% | Unaudited Condensed Consolidated Statements of Income Data | Metric (6-month) | Sep 27, 2020 (in thousands) | Sep 29, 2019 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Net sales | $37,864 | $34,502 | +$3,362 | +9.7% | | Gross profit | $12,117 | $10,420 | +$1,697 | +16.3% | | Gross profit % of net sales | 32.0% | 30.2% | +1.8 pp | | | Net income | $3,702 | $2,858 | +$844 | +29.5% | | EPS - basic and diluted | $0.36 | $0.28 | +$0.08 | +28.6% | [Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This statement outlines changes in shareholders' equity, including net income, dividends, and other income Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity Data | Metric | Sep 27, 2020 (in thousands) | Mar 29, 2020 (in thousands) | Change (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Total Shareholders' Equity | $45,507 | $42,436 | +$3,071 | | Retained Earnings (Sep 27, 2020) | $3,992 | $1,108 | +$2,884 | | Net income (6-month period) | $3,702 | $2,858 | +$844 | | Dividend declared (6-month period) | $(818) | $(1,623) | +$805 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash flows from operating, investing, and financing activities, indicating liquidity Unaudited Condensed Consolidated Statements of Cash Flows Data | Metric (6-month) | Sep 27, 2020 (in thousands) | Sep 29, 2019 (in thousands) | Change (in thousands) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Net cash provided by operating activities | $8,288 | $6,393 | +$1,895 | | Net cash used in investing activities | $(312) | $(215) | $(97) |\n| Net cash used in financing activities | $(1,426) | $(6,121) | +$4,695 | | Net increase in cash and cash equivalents | $6,550 | $57 | +$6,493 | | Cash and cash equivalents at end of period | $6,832 | $200 | +$6,632 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for financial statements, clarifying policies [Note 1 – Summary of Significant Accounting Policies](index=8&type=section&id=Note%201%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the significant accounting policies used in preparing the unaudited condensed consolidated financial statements, covering areas such as basis of presentation, fiscal year, use of estimates, cash and financial instruments, advertising costs, revenue recognition, allowances, credit concentration, segment information, inventory valuation, royalty payments, depreciation, amortization, long-lived assets, patent costs, income taxes, earnings per share, and recently-issued accounting standards [Basis of Presentation](index=8&type=section&id=Basis%20of%20Presentation) This section describes the basis for preparing financial statements, including consolidation principles and GAAP - The financial statements include Crown Crafts, Inc. and its subsidiaries, prepared under GAAP for interim financial information[20](index=20&type=chunk) - All necessary adjustments for fair presentation, including normal, recurring accruals and elimination of intercompany balances, are included[21](index=21&type=chunk) [Fiscal Year](index=8&type=section&id=Fiscal%20Year) This section defines the company's fiscal year and its impact on financial reporting periods - The Company's fiscal year ends on the Sunday nearest to or on March 31[22](index=22&type=chunk) - Fiscal year **2021** represents the **52-week** period ending March 28, **2021**[22](index=22&type=chunk) [Use of Estimates](index=8&type=section&id=Use%20of%20Estimates) This section highlights significant estimates in financial reporting, particularly for allowances and inventory - Significant estimates are made for allowances related to accounts receivable (customer deductions for returns, allowances, and disputes)[23](index=23&type=chunk) - Inventory reserves are established for discontinued finished goods, which are highly subjective[23](index=23&type=chunk) [Cash and Cash Equivalents](index=8&type=section&id=Cash%20and%20Cash%20Equivalents) This section defines cash and cash equivalents, including negative balances under the revolving credit line - The Company's credit facility includes a revolving line of credit with The CIT Group/Commercial Services, Inc. (CIT)[24](index=24&type=chunk) - Negative balances outstanding under this revolving line of credit are classified as cash, as they are immediately available[24](index=24&type=chunk) [Financial Instruments](index=8&type=section&id=Financial%20Instruments) This section explains financial instrument valuation, using carrying value for short-term items - For short-term instruments like cash and cash equivalents, accounts receivable, and accounts payable, carrying value is used as a reasonable estimate of fair value[25](index=25&type=chunk) [Advertising Costs](index=8&type=section&id=Advertising%20Costs) This section details advertising cost recognition policies and provides a breakdown of expenses - Advertising costs are primarily associated with cooperative advertising arrangements and recognized using the straight-line method[26](index=26&type=chunk) - Costs for online advertising (e.g., Facebook, Google) are recorded as incurred[26](index=26&type=chunk) Advertising Costs Data | Period | 2020 (in thousands) | 2019 (in thousands) | | :----------------------------------- | :------------------ | :------------------ | | Three months ended September 27/29 | $314 | $260 | | Six months ended September 27/29 | $659 | $544 | [Revenue Recognition](index=9&type=section&id=Revenue%20Recognition) This section outlines principles for recognizing revenue, including performance obligations and returns - Revenue is recognized upon satisfaction of contractual performance obligations and transfer of control of products to the customer[28](index=28&type=chunk) - A provision for anticipated returns is provided through a reduction of net sales and cost of products sold[29](index=29&type=chunk) - Revenue from unredeemed store credits and gift certificates is recognized at redemption, expiration, or when the likelihood of redemption becomes remote (generally **two years**)[30](index=30&type=chunk) [Allowances Against Accounts Receivable](index=9&type=section&id=Allowances%20Against%20Accounts%20Receivable) This section describes allowances against accounts receivable, such as for returns and advertising - Revenue from sales to retailers is reported net of allowances for anticipated returns, cooperative advertising, warehouse allowances, placement fees, volume rebates, coupons, and discounts[31](index=31&type=chunk) - Such allowances are recorded commensurate with sales activity or using the straight-line method[31](index=31&type=chunk) [Uncollectible Accounts](index=9&type=section&id=Uncollectible%20Accounts) This section explains the company's approach to managing uncollectible accounts through factoring agreements - The Company assigns the majority of its receivables under factoring agreements with CIT to reduce exposure to credit losses[32](index=32&type=chunk) - CIT bears the risk of loss if a factored receivable becomes uncollectible due to customer creditworthiness[32](index=32&type=chunk) [Credit Concentration](index=9&type=section&id=Credit%20Concentration) This section identifies significant credit concentration risks, particularly with CIT factoring agreements - Accounts receivable (net of allowances) amounted to **$18.8 million** at September 27, 2020[33](index=33&type=chunk) - Of this, **$17.9 million** was due from CIT under factoring agreements, and an additional **$6.8 million** was due from CIT as a negative balance on the revolving line of credit[33](index=33&type=chunk) - The combined amount of **$24.7 million** represents the maximum loss if CIT failed completely[33](index=33&type=chunk) [Other Accrued Liabilities](index=9&type=section&id=Other%20Accrued%20Liabilities) This section details the composition and changes in other accrued liabilities, including unearned revenue - Other accrued liabilities were **$465,000** at September 27, 2020, including **$359,000** in unearned revenue[34](index=34&type=chunk) - At March 29, 2020, other accrued liabilities were **$352,000**, with **$155,000** in unearned revenue[34](index=34&type=chunk) [Segment and Related Information](index=10&type=section&id=Segment%20and%20Related%20Information) This section provides information on the company's operating segment and product categories, detailing net sales - The Company operates primarily in one principal segment: infant and toddler products[36](index=36&type=chunk) - Products include infant and toddler bedding, bibs, soft bath products, disposable products, developmental and bath toys, and accessories[36](index=36&type=chunk) Segment and Related Information Data | Product Category | 3-Month Ended Sep 27, 2020 (in thousands) | 3-Month Ended Sep 29, 2019 (in thousands) | | :-------------------------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Bedding, blankets and accessories | $13,042 | $10,364 | | Bibs, bath, developmental toy, feeding, baby care and disposable products | $8,617 | $8,196 | | **Total net sales** | **$21,659** | **$18,560** | [Inventory Valuation](index=10&type=section&id=Inventory%20Valuation) This section describes inventory valuation methods and obsolescence review - Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in, first-out (FIFO) method and average cost method for a portion[36](index=36&type=chunk) - Management reviews inventory for obsolescence, physical deterioration, changes in price levels, and quantities not expected to be sold[38](index=38&type=chunk) [Royalty Payments](index=10&type=section&id=Royalty%20Payments) This section explains the basis for royalty payments and provides a breakdown of related expenses - Royalty payments are based on a percentage of sales with certain minimum guaranteed amounts, accrued based on historical and current sales trends[39](index=39&type=chunk) Royalty Payments Data | Period | 2020 (in thousands) | 2019 (in thousands) | | :----------------------------------- | :------------------ | :------------------ | | Three months ended September 27/29 | $1,600 | $1,300 | | Six months ended September 27/29 | $2,800 | $2,200 | [Depreciation and Amortization](index=10&type=section&id=Depreciation%20and%20Amortization) This section outlines methods and estimated useful lives for depreciation and amortization of assets - Depreciation and amortization are computed using the straight-line method over estimated useful lives[40](index=40&type=chunk) - Useful lives are **three to eight years** for property, plant and equipment, and **five to twenty years** for intangible assets other than goodwill[40](index=40&type=chunk) [Valuation of Long-Lived Assets and Identifiable Intangible Assets](index=10&type=section&id=Valuation%20of%20Long-Lived%20Assets%20and%20Identifiable%20Intangible%20Assets) This section describes the impairment review process for long-lived and intangible assets - Long-lived assets and identifiable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable[41](index=41&type=chunk) - In the event of impairment, the asset is written down to its fair market value[41](index=41&type=chunk) [Patent Costs](index=11&type=section&id=Patent%20Costs) This section details capitalization and amortization policies for patent application and defense costs - Legal and related costs for patent applications are capitalized and amortized if an economic benefit is anticipated[43](index=43&type=chunk) - Costs incurred in the protection or defense of patents are capitalized when future economic benefit is believed to be maintained or increased and a successful defense is probable[43](index=43&type=chunk) [Provision for Income Taxes](index=11&type=section&id=Provision%20for%20Income%20Taxes) This section explains income tax provision calculation, including effective tax rates and tax liabilities - The provision for income taxes includes currently payable federal, state, local, and foreign taxes, based on the estimated annual effective tax rate (ETR)[44](index=44&type=chunk) - The Company recorded discrete reserves for unrecognized tax liabilities of **$20,000** (three months ended Sep 27, 2020) and **$33,000** (six months ended Sep 27, 2020) related to state apportionment percentages[47](index=47&type=chunk) - The Franchise Tax Board of California (FTB) is examining the Company's consolidated income tax returns for fiscal years ended March 31, **2019**, April 1, **2018**, and April 2, **2017**[51](index=51&type=chunk) [Earnings Per Share](index=12&type=section&id=Earnings%20Per%20Share) This section describes calculation methodologies for basic and diluted earnings per share - Basic earnings per share is calculated using a weighted average of the number of shares outstanding[54](index=54&type=chunk) - Diluted shares outstanding are calculated using the treasury stock method, accounting for potentially dilutive exercisable options[54](index=54&type=chunk) [Recently-Issued Accounting Standards](index=12&type=section&id=Recently-Issued%20Accounting%20Standards) This section discusses the impact of recently-issued accounting standards on financial statements - The Company intends to adopt ASU No. **2016-13**, Financial Instruments – Credit Losses, effective April 3, **2023**[56](index=56&type=chunk) - The adoption of ASU No. **2016-13** is not expected to have a significant impact due to the Company assigning the majority of its trade accounts receivable under factoring agreements[56](index=56&type=chunk) [Note 2 – Financing Arrangements](index=12&type=section&id=Note%202%20%E2%80%93%20Financing%20Arrangements) This note details the Company's financing arrangements, including factoring agreements with CIT to manage credit risk, a revolving line of credit for liquidity, and a Paycheck Protection Program (PPP) loan for which forgiveness has been applied [Factoring Agreements](index=12&type=section&id=Factoring%20Agreements) This section details factoring agreements with CIT to manage accounts receivable and credit risk - The Company assigns the majority of its trade accounts receivable to CIT under factoring agreements to reduce credit loss exposure[58](index=58&type=chunk) - CIT bears credit losses for assigned accounts receivable from approved shipments[60](index=60&type=chunk) Factoring Fees Data | Factoring Fees (in thousands) | 3-Month Ended Sep 27, 2020 | 3-Month Ended Sep 29, 2019 | | :---------------------------- | :------------------------- | :------------------------- | | Amount | $85 | $62 | Factoring Fees Data | Factoring Fees (in thousands) | 6-Month Ended Sep 27, 2020 | 6-Month Ended Sep 29, 2019 | | :---------------------------- | :------------------------- | :------------------------- | | Amount | $130 | $113 | [Credit Facility](index=13&type=section&id=Credit%20Facility) This section describes the company's revolving line of credit with CIT, including terms and availability - The Company has a revolving line of credit with CIT of up to **$26.0 million**, maturing on July 11, **2022**, secured by a first lien on all assets[61](index=61&type=chunk) - As of September 27, 2020, there was no balance owed on the revolving line of credit, and **$24.2 million** was available[62](index=62&type=chunk) - As of March 29, 2020, **$2.6 million** was owed, and **$20.1 million** was available[62](index=62&type=chunk) [Paycheck Protection Program Loan](index=13&type=section&id=Paycheck%20Protection%20Program%20Loan) This section outlines the PPP loan details, including terms and forgiveness application status - The Company executed a **$1,963,800** loan under the Paycheck Protection Program (PPP) on April 19, 2020, accruing interest at **1.0%** per year and maturing on April 20, **2022**[64](index=64&type=chunk) - An application for forgiveness of the full loan amount was submitted on October 15, **2020**[67](index=67&type=chunk) - As of September 27, 2020, **$906,000** of the loan was classified as a current liability, and the remaining **$1.1 million** as long-term debt[67](index=67&type=chunk) [Note 3 – Goodwill](index=14&type=section&id=Note%203%20%E2%80%93%20Goodwill) Goodwill, representing the excess of purchase price over net identifiable assets, is allocated to two reporting units. The Company performs annual impairment measurements and concluded no impairment as of March 30, 2020 - Goodwill (net of accumulated impairment charges) amounted to **$7.1 million** as of September 27, 2020, and March 29, 2020[70](index=70&type=chunk) - The Company has two reporting units for goodwill impairment measurement: infant and toddler bedding, blankets and accessories; and infant and toddler bibs, developmental toys, bath care and disposable products[70](index=70&type=chunk) - The annual impairment measurement performed on March 30, 2020, concluded that goodwill was not impaired[72](index=72&type=chunk) [Note 4 – Other Intangible Assets](index=14&type=section&id=Note%204%20%E2%80%93%20Other%20Intangible%20Assets) Other intangible assets, primarily from business combinations, include tradenames, developed technology, non-compete covenants, patents, and customer relationships. Amortization expense is recorded in cost of products sold and marketing and administrative expenses - Total other intangible assets (gross) were **$14.2 million** as of September 27, 2020, and March 29, 2020[73](index=73&type=chunk) - Accumulated amortization was **$9.026 million** at September 27, 2020, compared to **$8.623 million** at March 29, 2020[73](index=73&type=chunk) Other Intangible Assets Data | Amortization Expense (in thousands) | 3-Month Ended Sep 27, 2020 | 3-Month Ended Sep 29, 2019 | | :---------------------------------- | :------------------------- | :------------------------- | | Total | $194 | $213 | Other Intangible Assets Data | Amortization Expense (in thousands) | 6-Month Ended Sep 27, 2020 | 6-Month Ended Sep 29, 2019 | | :---------------------------------- | :------------------------- | :------------------------- | | Total | $403 | $427 | [Note 5 – Inventories](index=15&type=section&id=Note%205%20%E2%80%93%20Inventories) Inventory consists primarily of finished goods, with smaller amounts of raw materials and work in process. Total inventory increased from March 29, 2020, to September 27, 2020 Inventories Data | Inventory Class | Sep 27, 2020 (in thousands) | Mar 29, 2020 (in thousands) | | :------------------ | :-------------------------- | :-------------------------- | | Raw Materials | $518 | $597 | | Work in Process | $28 | $23 | | Finished Goods | $18,645 | $17,112 | | **Total inventory** | **$19,191** | **$17,732** | [Note 6 – Leases](index=15&type=section&id=Note%206%20%E2%80%93%20Leases) The Company is party to various operating leases for offices, warehousing facilities, and certain office equipment. Lease costs are classified within cost of products sold and marketing and administrative expenses, and operating lease liabilities decreased from March 29, 2020, to September 27, 2020 - Cash payments related to recognized operating leases for the **six months** ended September 27, 2020, were **$811,000**, compared to **$714,000** in the prior year[76](index=76&type=chunk) - As of September 27, 2020, the weighted-average remaining lease term was **2.6 years**, and the weighted-average discount rate was **3.79%**[76](index=76&type=chunk) Leases Data | Operating Lease Liabilities (in thousands) | Sep 27, 2020 | Mar 29, 2020 | | :--------------------------------------- | :----------- | :----------- | | Total operating lease liabilities | $4,420 | $5,150 | [Note 7 – Stock-based Compensation](index=16&type=section&id=Note%207%20%E2%80%93%20Stock-based%20Compensation) The Company utilizes the 2014 Omnibus Equity Compensation Plan to grant stock options and non-vested stock to directors and employees, aiming to attract and retain talent. Stock-based compensation expense increased for both the three and six-month periods ended September 27, 2020 [Stock Options](index=16&type=section&id=Stock%20Options) This section details stock option grants, outstanding options, and related compensation expense Stock Options Data | Stock-based Compensation Expense (in thousands) | 3-Month Ended Sep 27, 2020 | 3-Month Ended Sep 29, 2019 | | :---------------------------------------------- | :------------------------- | :------------------------- | | Amount | $100 | $75 | Stock Options Data | Stock-based Compensation Expense (in thousands) | 6-Month Ended Sep 27, 2020 | 6-Month Ended Sep 29, 2019 | | :---------------------------------------------- | :------------------------- | :------------------------- | | Amount | $186 | $140 | - Options outstanding at September 27, 2020: **627,500 shares** with a weighted-average exercise price of **$6.52**[82](index=82&type=chunk) - No options were exercised during either the three or six-month periods ended September 27, 2020, or September 29, 2019[82](index=82&type=chunk) [Non-vested Stock Granted to Non-employee Directors](index=17&type=section&id=Non-vested%20Stock%20Granted%20to%20Non-employee%20Directors) This section describes non-vested stock grants to non-employee directors, including vesting and fair value - **41,452 shares** of non-vested stock were granted to non-employee directors on August 12, 2020, with a fair value of **$5.79 per share**, vesting over a **two-year** period[86](index=86&type=chunk) - In August 2020, **37,256 shares** granted to non-employee directors vested, with an aggregate value of **$179,000**[87](index=87&type=chunk) [Non-vested Stock Granted to Employees](index=19&type=section&id=Non-vested%20Stock%20Granted%20to%20Employees) This section details non-vested stock grants to employees, including vesting schedules and fair value - **25,000 shares** of non-vested stock were granted to Donna Sheridan (President and CEO of NoJo Baby & Kids, Inc.) on January 18, 2019, vesting on January 18, 2021, with a fair value of **$5.86 per share**[89](index=89&type=chunk) - **20,000 shares** of non-vested stock were granted to certain executive officers on June 10, 2020, vesting on June 10, 2022, with a fair value of **$4.92 per share**[90](index=90&type=chunk) [Performance Bonus Plan](index=19&type=section&id=Performance%20Bonus%20Plan) This section discusses the termination of the performance bonus plan and unrecognized compensation - The Company's **2012** Performance Bonus Plan was terminated on June 9, **2020**[91](index=91&type=chunk) - No shares were granted and no compensation expense was recorded under the **2012** Plan during the three or six-month periods ended September 27, 2020, or September 29, 2019[91](index=91&type=chunk) - Total unrecognized compensation expense related to non-vested stock grants amounted to **$426,000** as of September 27, 2020, to be recognized over a weighted-average vesting term of **11.9 months**[93](index=93&type=chunk) [Note 8 – Subsequent Events](index=19&type=section&id=Note%208%20%E2%80%93%20Subsequent%20Events) This section confirms the evaluation of subsequent events and the absence of material disclosures - The Company has evaluated events between September 27, 2020, and the financial statements' issuance date and determined no material subsequent events require disclosure[94](index=94&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=21&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial performance, liquidity, and capital resources for the three and six-month periods ended September 27, 2020, highlighting significant increases in net sales and net income, improved gross profit margins, and a strong liquidity position despite the ongoing COVID-19 pandemic [FORWARD-LOOKING INFORMATION](index=21&type=section&id=FORWARD-LOOKING%20INFORMATION) This section highlights forward-looking statements and associated risks, including COVID-19 impact - This report contains forward-looking statements based on management's current expectations, projections, estimates, and assumptions[97](index=97&type=chunk) - Known and unknown risks and uncertainties include the impact of the COVID-19 pandemic, general economic conditions, changing competition, and dependence on third-party suppliers and licenses[97](index=97&type=chunk) [DESCRIPTION OF BUSINESS](index=21&type=section&id=DESCRIPTION%20OF%20BUSINESS) This section describes the company's operations in infant, toddler, and juvenile products, and competition - The Company operates in the infant, toddler, and juvenile products segment through its wholly-owned subsidiaries NoJo, Sassy Baby, Inc., and Carousel Designs, LLC[98](index=98&type=chunk) - Products are marketed under Company-owned trademarks, licensed trademarks, and as private label goods, sold directly to retailers and consumers[98](index=98&type=chunk) - The industry is highly competitive, and most products are produced by foreign contract manufacturers, primarily in China[101](index=101&type=chunk) [RESULTS OF OPERATIONS](index=22&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, including net sales, gross profit, and expenses [Net Sales](index=22&type=section&id=Net%20Sales) This section analyzes changes in net sales by product category for the three and six-month periods Net Sales Data | Metric (3-month) | Sep 27, 2020 (in thousands) | Sep 29, 2019 (in thousands) | Change (in thousands) | % Change | | :--------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Total net sales | $21,659 | $18,560 | +$3,099 | +16.7% | | Bedding, blankets and accessories | $13,042 | $10,364 | +$2,678 | +25.8% | | Bibs, bath, etc. | $8,617 | $8,196 | +$421 | +5.1% | Net Sales Data | Metric (6-month) | Sep 27, 2020 (in thousands) | Sep 29, 2019 (in thousands) | Change (in thousands) | % Change | | :--------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Total net sales | $37,864 | $34,502 | +$3,362 | +9.7% |\n| Bedding, blankets and accessories | $23,059 | $18,077 | +$4,982 | +27.6% | | Bibs, bath, etc. | $14,805 | $16,425 | $(1,620) | -9.9% | - The increase in sales is due to higher sell-through at major retailers, partially offset by declines at certain retailers impacted by the COVID-19 pandemic[104](index=104&type=chunk) [Gross Profit](index=22&type=section&id=Gross%20Profit) This section analyzes changes in gross profit and gross profit margins for the three and six-month periods Gross Profit Data | Metric (3-month) | Sep 27, 2020 | Sep 29, 2019 | Change | % Change | | :-------------------------- | :----------- | :----------- | :----- | :------- | | Gross profit (in thousands) | $7,094 | $5,869 | +$1,225 | +20.9% | | % of net sales | 32.8% | 31.6% | +1.2 pp | | Gross Profit Data | Metric (6-month) | Sep 27, 2020 | Sep 29, 2019 | Change | % Change | | :-------------------------- | :----------- | :----------- | :----- | :------- | | Gross profit (in thousands) | $12,117 | $10,420 | +$1,697 | +16.3% | | % of net sales | 32.0% | 30.2% | +1.8 pp | | - The increase in gross profit is due to the increase in net sales as well as a more favorable customer and product mix[105](index=105&type=chunk) [Marketing and Administrative Expenses](index=22&type=section&id=Marketing%20and%20Administrative%20Expenses) This section analyzes changes in marketing and administrative expenses and their percentage of net sales Marketing and Administrative Expenses Data | Metric (3-month) | Sep 27, 2020 | Sep 29, 2019 | Change | % Change | | :------------------------------------ | :----------- | :----------- | :----- | :------- | | Marketing and administrative expenses (in thousands) | $3,802 | $3,476 | +$326 | +9.4% | | % of net sales | 17.6% | 18.7% | -1.1 pp | | Marketing and Administrative Expenses Data | Metric (6-month) | Sep 27, 2020 | Sep 29, 2019 | Change | % Change | | :------------------------------------ | :----------- | :----------- | :----- | :------- | | Marketing and administrative expenses (in thousands) | $7,182 | $6,928 | +$254 | +3.7% | | % of net sales | 19.0% | 20.1% | -1.1 pp | | - The increase in amount for the current year-to-date period is primarily the result of higher outside services (**+$201,000**) and higher advertising (**+$115,000**), partially offset by lower travel expenses (**-$67,000**)[106](index=106&type=chunk) [Income Tax Expense](index=22&type=section&id=Income%20Tax%20Expense) This section details the company's income tax expense, effective tax rate, and discrete tax adjustments - The estimated annual effective tax rate (ETR) from continuing operations was **24.2%** for the **six-month** period ended September 27, 2020[107](index=107&type=chunk) - Discrete reserves for unrecognized tax liabilities of **$20,000** (three months ended Sep 27, 2020) and **$33,000** (six months ended Sep 27, 2020) were recorded[109](index=109&type=chunk) - A reversal of prior reserves resulted in a discrete income tax benefit of **$232,000** and a credit to interest expense of **$78,000** during the **six-month** period ended September 29, 2019[111](index=111&type=chunk) [FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES](index=24&type=section&id=FINANCIAL%20POSITION,%20LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses financial position, liquidity, and capital resources, including cash flow and credit - Net cash provided by operating activities increased from **$6.4 million** (six months ended Sep 29, 2019) to **$8.3 million** (six months ended Sep 27, 2020)[115](index=115&type=chunk) - Net cash used in financing activities decreased from **$6.1 million** (prior year) to **$1.4 million** (current year), primarily due to lower net repayments under the revolving line of credit and receipt of a PPP loan[117](index=117&type=chunk) - As of September 27, 2020, there was no balance owed on the revolving line of credit, and **$24.2 million** was available[118](index=118&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=25&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses the company's exposure to market risks, including interest rate risk, commodity rate risk (primarily cotton, oil, and labor in China), and market concentration risk with its top customers and licensed products [INTEREST RATE RISK](index=25&type=section&id=INTEREST%20RATE%20RISK) This section discusses the company's exposure to interest rate risk, particularly concerning floating rate debt - Although the Company could have an exposure to interest rate risk related to its floating rate debt, there was no balance outstanding on its floating rate debt as of September 27, 2020[128](index=128&type=chunk) [COMMODITY RATE RISK](index=25&type=section&id=COMMODITY%20RATE%20RISK) This section discusses the company's exposure to commodity price risk, primarily cotton, oil, and labor costs - The Company's exposure to commodity price risk primarily relates to changes in the prices in China of cotton, oil, and labor, which are principal inputs for its products[125](index=125&type=chunk) - A strengthening of the Chinese currency versus the U.S. dollar could result in an increase in the cost of the Company's finished goods[125](index=125&type=chunk) [MARKET CONCENTRATION RISK](index=25&type=section&id=MARKET%20CONCENTRATION%20RISK) This section identifies market concentration risks with top customers and licensed products - The Company's top **two customers** represented approximately **62%** of its gross sales in fiscal year **2020**[126](index=126&type=chunk) - **40%** of the Company's gross sales in fiscal year **2020** consisted of licensed products, with **30%** associated with license agreements with affiliated companies of the Walt Disney Company[126](index=126&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=25&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the reporting period, and no material changes to internal control over financial reporting were identified - The Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report[127](index=127&type=chunk) - No changes in the Company's internal control over financial reporting (ICFR) were identified that materially affected, or are reasonably likely to materially affect, the Company's ICFR during the **three-month** period ended September 27, 2020[129](index=129&type=chunk) PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, and other disclosures [ITEM 1. LEGAL PROCEEDINGS](index=26&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The Company is involved in various legal and regulatory proceedings in the ordinary course of its business, none of which are expected to have a material adverse effect on its financial condition, results of operations, or cash flow - The Company is involved in various legal and regulatory proceedings arising in the ordinary course of its business[131](index=131&type=chunk) - None of these proceedings are expected to have a material adverse effect on the Company's financial condition, results of operations, or cash flow[131](index=131&type=chunk) [ITEM 1A. RISK FACTORS](index=26&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the Company's annual report on Form 10-K for the fiscal year ended March 29, 2020 - There have been no material changes to the risk factors disclosed in Item 1A. of Part 1 of the Company's annual report on Form 10-K for the year ended March 29, 2020[132](index=132&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=26&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) There were no unregistered sales of equity securities or use of proceeds to report for this period - None[133](index=133&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=26&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) There were no defaults upon senior securities to report for this period - None[134](index=134&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=26&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the Company - Not applicable[135](index=135&type=chunk) [ITEM 5. OTHER INFORMATION](index=26&type=section&id=ITEM%205.%20OTHER%20INFORMATION) There is no other information to report under this item - None[136](index=136&type=chunk) [ITEM 6. EXHIBITS](index=27&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the report, including corporate organizational documents, certifications by the CEO and CFO, and interactive data files in XBRL format for the financial statements and notes - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, and Rule 13a-14(a)/15d-14(a) and Section 1350 Certifications by the Company's Chief Executive Officer and Chief Financial Officer[138](index=138&type=chunk) - Interactive data files in XBRL format are provided for the Unaudited Condensed Consolidated Balance Sheets, Statements of Income, Statements of Changes in Shareholders' Equity, Statements of Cash Flows, and Notes to Unaudited Condensed Consolidated Financial Statements[138](index=138&type=chunk)

Crown Crafts, Inc. (NASDAQ:CRWS) Q1 2021 Earnings Conference Call August 12, 2020 2:00 PM ET Company Participants Randall Chestnut - Chairman, President and Chief Executive Officer Olivia Elliott - Vice President and Chief Financial Officer Conference Call Participants Linda Bolton-Weiser - D.A. Davidson Operator Hello, ladies and gentlemen and welcome to the Crown Crafts, Inc. Investors Conference Call. Your host for today’s call is Mr. Randall Chestnut, Chairman, President and Chief Executive Officer. [Op ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.01 per share CRWS Nasdaq Capital Market FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 28, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____to_____ Commission Fi ...

Crown Crafts, Inc. (NASDAQ:CRWS) Q4 2020 Earnings Conference Call June 10, 2020 2:00 PM ET Company Participants Olivia Elliott - VP, CFO & Secretary Randall Chestnut - Chairman, CEO & President Conference Call Participants Linda Bolton-Weiser - D.A. Davidson & Co. Spencer Kinkelaar - Ardent Capital Management John Deysher - Pinnacle Ralph Marash - First Manhattan Dennis Scannell - Rutabaga Capital Management Operator Hello, ladies and gentlemen, and welcome to the Crown Crafts, Inc. Investors Conference Cal ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 29, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-7604 (Exact name of registrant as specified in its charter) Crown Crafts, Inc. Delaware 58-0678148 (State of Incorporation) (I.R.S. Employer Identification N ...

Crown Crafts, Inc. (NASDAQ:CRWS) Q2 2020 Earnings Conference Call February 12, 2020 2:00 PM ET Company Participants Randall Chestnut - President and Chief Executive Officer Olivia Elliott - Vice President and Chief Financial Officer Conference Call Participants Linda Bolton-Weiser - D.A. Davidson Ralph Marash - First Manhattan Tony Chiarenza - Key Equity Investors Operator Hello, ladies and gentlemen, and welcome to the Crown Crafts Incorporated Investors Conference Call. Your host for today's call is Mr. R ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 29, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____to_____ Commission File No. 1-7604 Crown Crafts, Inc. (Exact name of registrant as specified in its charter) Delaware (Stateorotherjurisdictionofincorporation) (IRS ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 29, 2019 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____to_____ Commission File No. 1-7604 Crown Crafts, Inc. (Exact name of registrant as specified in its charter) Delaware 58-0678148 (State or other jurisdiction of in ...