Crown Crafts(US:CRWS)2026-02-11 12:17Financial Performance - Net sales for the three months ended December 28, 2025, were $20.7 million, a decrease of $2.6 million or 11.3% compared to $23.4 million for the same period in 2024[60] - Gross profit margin for the three-month period ended December 28, 2025, was 23.5%, down from 26.1% for the same period in 2024, reflecting a decrease in gross profit of $1.2 million[61] - Net income for the three months ended December 28, 2025, was $1.5 million, an increase of $0.6 million or 69.1% compared to $0.9 million for the same period in 2024[60] Sales and Product Performance - Sales of bedding and diaper bags decreased by $3.3 million, while sales of bibs, toys, and disposable products increased by $0.7 million for the three-month period[60] - Approximately 66% of the Company's gross sales in fiscal year 2025 were generated from its top two customers, indicating a high market concentration risk[77] - 50% of the Company's gross sales in fiscal year 2025 were from licensed products, with 21% of those sales linked to license agreements with affiliated companies of the Walt Disney Company[77] Expenses and Cash Flow - Marketing and administrative expenses increased to 24.0% of net sales for the three-month period ended December 28, 2025, from 18.8% for the same period in 2024, due to severance expenses[62] - Net cash provided by operating activities increased from $7.0 million for the nine-month period ended December 29, 2024, to $7.1 million for the nine-month period ended December 28, 2025[66] - Net cash used in investing activities decreased from $17.0 million in the prior year to $616 thousand in the current year, primarily due to capital expenditures[67] Debt and Liquidity - As of December 28, 2025, the balance on the revolving line of credit was $11.3 million, with $10.6 million available based on eligible accounts receivable and inventory[69] - 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, and it has complied with this requirement as of December 28, 2025[72] - The Company believes its cash flow from operations and available funds under the revolving line of credit will be sufficient to meet liquidity needs[73] Market and Operational Risks - The Company sources products primarily from foreign manufacturers, with significant exposure to commodity price risks related to cotton, oil, and labor costs in China[76] - The Company faces risks from changes in the Chinese currency exchange rate, which could increase the cost of finished goods despite payments being made in U.S. dollars[76] - The Company’s financial performance is influenced by various external factors, including economic and regulatory conditions beyond its control[73] - The Company has disclosed market risks in its Annual Report on Form 10-K for the year ended March 30, 2025[74] Other Income and Charges - Other income increased by $2.5 million for the three-month period ended December 28, 2025, primarily due to $2.5 million in insurance proceeds related to claims filed under a representation and warranties insurance policy[63] - Factoring fees included in marketing and administrative expenses amounted to $74 thousand for the three-month period ended December 28, 2025[71] - As of December 28, 2025, the Company had $16.4 million of indebtedness with variable interest rates, and a 1% increase in interest rates would decrease annual net income by approximately $124 thousand[75] - 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[72]