Crown Crafts Inc (CRWS, Financial) filed Quarterly Report for the period ended 2009-09-27.
Crown Crafts, Inc. operates, both directly and indirectly through its subsidiaries, in two principal business segments within the textile industry: Adult Home Furnishing and Juvenile Products, and Infant Products. Adult Home Furnishing and Juvenile Products consists of Bedroom Products, Throws and Decorative Home Accessories, and Juvenile Products. The Infant Products segment consists of infant bedding, bibs, infant soft goods and accessories. Crown Crafts Inc has a market cap of $28.7 million; its shares were traded at around $3.12 with a P/E ratio of 26 and P/S ratio of 0.3.
Bib and bath sales increased for the six-month period of fiscal year 2010 as compared to fiscal year 2009. Sales increased by $1.1 million due to the Neat Solutions Acquisition and increased by $2.6 million due to sales of new designs and promotions and higher holiday shipments. Offsetting these increases was a decrease of $2.2 million due to programs that were discontinued or had lower replenishment orders.
Gross profit decreased in amount in relation to the decrease in net sales but increased as a percentage of net sales for the six-month period of fiscal year 2010 as compared to the same period of fiscal year 2009. The increase in the gross profit percentage is due to the absence in the current year of $243,000 in charges incurred in the prior year related to transitioning away from the warehousing and shared services agreement entered into in conjunction with the Companys acquisition of the baby products line of Springs Global US, Inc. on November 5, 2007. Also, the Company in the current year has incurred $190,000 in lower product development costs and $79,000 in lower costs to operate the Companys Foreign Representative Office in China, offset by an increase in testing costs of $171,000.
Marketing and Administrative Expenses: Marketing and administrative expenses for the three-month period of fiscal year 2010 increased slightly in amount as compared to the prior year, and were unchanged for the six-month periods. In the three and six-month periods of the current year, the Company incurred $389,000 and $431,000, respectively, of costs related to the Neat Solutions Acquisition and related integration. Also, on August 11, 2009, the Board authorized an amendment to the non-vested stock grant that had been awarded in 2006 to the President of the Company. Pursuant to the terms of the amended non-vested stock grant, the vesting of 160,000 of the 320,000 shares awarded to the individual was accelerated from August 25, 2010 to August 12, 2009. The acceleration of the vesting of these shares resulted in the recognition of $115,000 in net additional compensation expense during the three and six-month periods of the current year as compared to the prior year. The Company has also incurred increased factoring fees of $72,000 and $134,000 in the three and six-month periods of the current year, respectively, as compared to the prior year. These increases were offset by the Companys avoidance in the six-month period of the current year of $194,000 of costs that were incurred in the same period of the prior year that were associated with the governance and standstill agreement entered into on July 1, 2008 with Wynnefield Small Cap Value, L.P. and its affiliates.
The Company has built up its cash reserves in order to preserve the Companys ability to meet its working capital needs in the event that CIT, the Companys primary lender, should suffer an adverse liquidity event that would jeopardize the Companys ability to draw upon its revolving line of credit. On September 27, 2009, the Company had $12.0 million in cash and $1.1 million available under its $26.0 million revolving credit facility, based on eligible accounts receivable and inventory balances as of that date. Also, the entire amount of the $1.5 million sub-limit for letters of credit associated with the revolving credit facility was available.
To reduce its exposure to credit losses and to enhance the predictability of its cash flow, the Company assigns the majority of its trade accounts receivable to CIT pursuant to factoring agreements. CIT approves customer accounts and credit lines and collects the Companys accounts receivable balances. Under the terms of the factoring agreements, which expire in July 2010, CIT remits payments to the Company on the average due date of each group of invoices assigned. If a customer fails to pay CIT on the due date, the Company is charged interest at prime less 1.0%, which was 2.25% at September 27, 2009, until payment is received. The Company incurred interest expense of $19,000 and $33,000 for the three-month periods ended September 27, 2009 and September 28, 2008, respectively, and $35,000 and $64,000 for the six-month periods ended September 27, 2009 and September 28, 2008, respectively, as a result of the failure of the Companys customers to pay CIT by the due date. CIT bears credit losses with respect to assigned accounts receivable from approved customers that are within approved credit limits. The Company bears losses resulting from returns, allowances, claims and discounts.
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Crown Crafts, Inc. operates, both directly and indirectly through its subsidiaries, in two principal business segments within the textile industry: Adult Home Furnishing and Juvenile Products, and Infant Products. Adult Home Furnishing and Juvenile Products consists of Bedroom Products, Throws and Decorative Home Accessories, and Juvenile Products. The Infant Products segment consists of infant bedding, bibs, infant soft goods and accessories. Crown Crafts Inc has a market cap of $28.7 million; its shares were traded at around $3.12 with a P/E ratio of 26 and P/S ratio of 0.3.
Highlight of Business Operations:
Bib and bath sales increased for the three-month period of fiscal year 2010 as compared to fiscal year 2009. Sales increased by $1.1 million due to the Neat Solutions Acquisition and increased by $1.0 million due to sales of new designs and promotions and higher holiday shipments. Offsetting these increases was a decrease of $0.3 million due to programs that were discontinued or had lower replenishment orders.Bib and bath sales increased for the six-month period of fiscal year 2010 as compared to fiscal year 2009. Sales increased by $1.1 million due to the Neat Solutions Acquisition and increased by $2.6 million due to sales of new designs and promotions and higher holiday shipments. Offsetting these increases was a decrease of $2.2 million due to programs that were discontinued or had lower replenishment orders.
Gross profit decreased in amount in relation to the decrease in net sales but increased as a percentage of net sales for the six-month period of fiscal year 2010 as compared to the same period of fiscal year 2009. The increase in the gross profit percentage is due to the absence in the current year of $243,000 in charges incurred in the prior year related to transitioning away from the warehousing and shared services agreement entered into in conjunction with the Companys acquisition of the baby products line of Springs Global US, Inc. on November 5, 2007. Also, the Company in the current year has incurred $190,000 in lower product development costs and $79,000 in lower costs to operate the Companys Foreign Representative Office in China, offset by an increase in testing costs of $171,000.
Marketing and Administrative Expenses: Marketing and administrative expenses for the three-month period of fiscal year 2010 increased slightly in amount as compared to the prior year, and were unchanged for the six-month periods. In the three and six-month periods of the current year, the Company incurred $389,000 and $431,000, respectively, of costs related to the Neat Solutions Acquisition and related integration. Also, on August 11, 2009, the Board authorized an amendment to the non-vested stock grant that had been awarded in 2006 to the President of the Company. Pursuant to the terms of the amended non-vested stock grant, the vesting of 160,000 of the 320,000 shares awarded to the individual was accelerated from August 25, 2010 to August 12, 2009. The acceleration of the vesting of these shares resulted in the recognition of $115,000 in net additional compensation expense during the three and six-month periods of the current year as compared to the prior year. The Company has also incurred increased factoring fees of $72,000 and $134,000 in the three and six-month periods of the current year, respectively, as compared to the prior year. These increases were offset by the Companys avoidance in the six-month period of the current year of $194,000 of costs that were incurred in the same period of the prior year that were associated with the governance and standstill agreement entered into on July 1, 2008 with Wynnefield Small Cap Value, L.P. and its affiliates.
The Company has built up its cash reserves in order to preserve the Companys ability to meet its working capital needs in the event that CIT, the Companys primary lender, should suffer an adverse liquidity event that would jeopardize the Companys ability to draw upon its revolving line of credit. On September 27, 2009, the Company had $12.0 million in cash and $1.1 million available under its $26.0 million revolving credit facility, based on eligible accounts receivable and inventory balances as of that date. Also, the entire amount of the $1.5 million sub-limit for letters of credit associated with the revolving credit facility was available.
To reduce its exposure to credit losses and to enhance the predictability of its cash flow, the Company assigns the majority of its trade accounts receivable to CIT pursuant to factoring agreements. CIT approves customer accounts and credit lines and collects the Companys accounts receivable balances. Under the terms of the factoring agreements, which expire in July 2010, CIT remits payments to the Company on the average due date of each group of invoices assigned. If a customer fails to pay CIT on the due date, the Company is charged interest at prime less 1.0%, which was 2.25% at September 27, 2009, until payment is received. The Company incurred interest expense of $19,000 and $33,000 for the three-month periods ended September 27, 2009 and September 28, 2008, respectively, and $35,000 and $64,000 for the six-month periods ended September 27, 2009 and September 28, 2008, respectively, as a result of the failure of the Companys customers to pay CIT by the due date. CIT bears credit losses with respect to assigned accounts receivable from approved customers that are within approved credit limits. The Company bears losses resulting from returns, allowances, claims and discounts.
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