Crown Crafts(CRWS) - 2026 Q2 - Quarterly Report

Sales Performance - Net sales for the three months ended September 28, 2025, were $23.7 million, a decrease of $765 thousand or 3.1% compared to $24.5 million for the same period in 2024[59] - For the six months ended September 28, 2025, net sales were $39.2 million, a decrease of $1.5 million or 3.7% compared to $40.7 million for the same period in 2024[60] - Sales of bedding and diaper bags decreased by $1.6 million, while sales of bibs, toys, and disposable products increased by $0.8 million during the three-month period[59] Profitability and Margins - Gross profit margin for the three-month period ended September 28, 2025, was 27.7%, down from 28.4% in the prior year, primarily due to increased tariff costs on imports from China[61] - Marketing and administrative expenses decreased to 19.9% of net sales for the three-month period ended September 28, 2025, from 22.3% in the prior year[63] Cash Flow and Liquidity - Net cash provided by operating activities decreased from $7.0 million for the six-month period ended September 29, 2024, to $4.4 million for the same period in 2025[67] - The Company believes its cash flow from operations and available funds under the revolving line of credit will be sufficient to meet liquidity needs[74] Debt and Credit - As of September 28, 2025, the balance on the revolving line of credit was $10.7 million, with $13.7 million available based on eligible accounts receivable and inventory[70] - As of September 28, 2025, the Company had $16.3 million of indebtedness at a variable interest rate, with a potential annual net income decrease of approximately $122 thousand for each 1% increase in interest rates[76] - The Company must maintain Excess Availability of at least $4.0 million or the sum of the term loan balance plus $1.0 million until the term loan is paid in full[73] - The fixed charge coverage ratio has been reinstated but will not be tested if the Company complies with the Availability Covenant in the preceding fiscal quarter[73] - The Company has complied with the Excess Availability requirements as of September 28, 2025[73] External Factors and Risks - The company is evaluating the potential impact of increased tariffs on imports from China, which have affected product costs and shipments[57] - The Company sources products primarily from foreign manufacturers, with significant exposure to commodity price risks related to cotton, oil, and labor in China[77] - The Company is exposed to risks from fluctuations in the Chinese currency, which could increase the cost of finished goods despite payments being made in U.S. dollars[77] - The Company's financial performance is influenced by various external factors, including economic and regulatory conditions[74] Customer Concentration - Approximately 66% of the Company's gross sales in fiscal year 2025 were generated from its top two customers[78] - 50% of the Company's gross sales in fiscal year 2025 consisted of licensed products, with 21% of those sales linked to agreements with affiliated companies of the Walt Disney Company[78]