Crown Crafts, Inc. (NASDAQ-CM:CRWS) (the “Company”) today reported
results for the fiscal 2018 third quarter, which ended December 31,
2017.
“We are pleased that with the help of Carousel
Designs, sales for the quarter were up compared with the prior
year,” said E. Randall Chestnut, Chairman, President and Chief
Executive Officer. “However, we experienced some challenges
during the quarter that caused a decrease in profitability,
including charges for acquisition expenses and increased credit
costs associated with a major customer who filed for bankruptcy
that were not incurred in the prior year. Additionally, due
to the timing of the acquisition of the Sassy®-branded product
line, we recorded several weeks of expenses compared to a
relatively small amount of additional sales during the quarter. One
of our subsidiaries also experienced a shift in both customer and
product mix that was less profitable, as well as higher sales of
closeout inventory, which are typically sold at lower
margins. Finally, several non-cash charges to income tax
expense were required by recent tax legislation. These
charges, which amounted to $541,000, had the effect of lowering net
income for the quarter by more than half and cut diluted earnings
per share for the quarter by $0.05.”
Financial Results
Net income for the third quarter of fiscal 2018
was $531,000, or $0.05 per diluted share, on net sales of $17.5
million, compared with net income of $1.9 million, or $0.19 per
diluted share, on net sales of $17.3 million for the third quarter
of fiscal 2017. Gross profit for the current-year quarter was
30.1% of net sales, down from 32.7% in the prior-year
quarter.
For the nine-month period, net income was $1.8
million, or $0.18 per diluted share, on net sales of $47.6 million,
compared with net income of $4.0 million, or $0.39 per diluted
share, on net sales of $48.7 million for the first nine months of
fiscal 2017. Gross profit for both nine-month periods was
unchanged at 29.2% of net sales.
The Company recorded certain pre-tax expenses
totaling $241,000 and $1.1 million during the three and nine-month
periods of fiscal 2018, respectively, that were not incurred in
fiscal 2017. For the quarter, these expenses included $81,000
in credit coverage fees on a retailer that filed for bankruptcy
during the second quarter and $160,000 in costs associated with the
Company’s acquisitions of Carousel Designs and Sassy. For the
nine-month period, these expenses included $572,000 in credit
coverage fees, $424,000 in costs associated with the Company’s
acquisitions of Carousel Designs and Sassy, and $90,000 in audit
fees associated with the Company’s transition from a smaller
reporting company to an accelerated filer for SEC purposes.
On an after-tax basis, these expenses totaled $170,000 and $728,000
for the three and nine-month periods of fiscal 2018,
respectively. Additionally, although tax legislation enacted
on December 22, 2017 lowered the federal corporate tax rate to be
applied in future periods to 21%, the Company incurred non-cash
revaluations of its deferred tax assets and its reserve for
unrecognized tax benefits of $409,000 and $132,000, respectively,
which taken together negatively affected the quarter and
year-to-date diluted earnings per share by $0.05. The Company
expects the reduction in the tax rate to positively affect its
future earnings.
“The acquisitions that we have completed in the
past several months offer the Company exciting new opportunities to
diversify both our customer and product mix. Carousel Designs
opens a new channel of distribution for the Company – customized
and personalized products sold direct to the end consumer – and
Sassy’s line of early childhood developmental toys gives us new and
exciting product offerings,” continued Chestnut.
Quarterly Cash Dividend
The Company also announced that its Board of
Directors declared a quarterly cash dividend on the Company’s
Series A common stock of $0.08 per share, which will be paid on
April 6, 2018 to stockholders of record at the close of business on
March 16, 2018. “We are pleased to once again reward our
stockholders for their support by providing a dividend, which
reflects our Board’s continued confidence in the business and Crown
Crafts’ commitment to return value to our stockholders,” Chestnut
said.
Conference Call
The Company will host a teleconference today at
1:00 p.m. Central Standard Time to discuss the Company’s results,
during which interested individuals will be given the opportunity
to ask appropriate questions. To join the teleconference,
dial (844) 861-5504 and ask to be joined into the Crown Crafts,
Inc. call. The teleconference can also be accessed in
listen-only mode by visiting the Company’s website at
www.crowncrafts.com. The financial information to be
discussed during the teleconference may be accessed prior to the
call on the investor relations portion of the Company’s
website. A telephone replay of the teleconference will be
available one hour after the end of the call through 4:00 p.m.
Central Standard Time on February 15, 2018. To access the
replay, dial (877) 344-7529 in the United States or (412) 317-0088
from international locations and refer to conference number
10116314.
About Crown Crafts, Inc.
Crown Crafts, Inc., founded in 1957, is one of
America’s largest producers of infant bedding, toddler bedding,
bibs and developmental toys. Crown Crafts, Inc. operates through
its three wholly owned subsidiaries, Crown Crafts Infant Products,
Inc., Hamco, Inc. (which includes the Sassy product line) and
Carousel Designs, LLC. The Company’s subsidiaries market a variety
of infant, toddler and juvenile products under Company-owned
trademarks as well as licensed collections and exclusive private
label programs. Sales are made directly to retailers such as mass
merchants, large chain stores and juvenile specialty stores, as
well as directly to consumers through www.babybedding.com. For more
information, visit the Company’s website at
www.crowncrafts.com.
Forward-Looking Statements
The foregoing contains forward-looking
statements within the meaning of the Securities Act of 1933, the
Securities Exchange Act of 1934 and the Private Securities
Litigation Reform Act of 1995. Such statements are based upon
management’s current expectations, projections, estimates and
assumptions. Words such as “expects,” “believes,” “anticipates” and
variations of such words and similar expressions identify such
forward-looking statements. Forward-looking statements involve
known and unknown risks and uncertainties that may cause future
results to differ materially from those suggested by the
forward-looking statements. These risks include, among others,
general economic conditions, including changes in interest rates,
in the overall level of consumer spending and in the price of oil,
cotton and other raw materials used in the Company’s products,
changing competition, changes in the retail environment, the
Company’s ability to successfully integrate newly acquired
businesses, the level and pricing of future orders from the
Company’s customers, the extent to which the Company’s business is
concentrated in a small number of customers, the Company’s
dependence upon third-party suppliers, including some located in
foreign countries, customer acceptance of both new designs and
newly-introduced product lines, actions of competitors that may
impact the Company’s business, disruptions to transportation
systems or shipping lanes used by the Company or its suppliers, and
the Company’s dependence upon licenses from third parties.
Reference is also made to the Company’s periodic filings with the
Securities and Exchange Commission for additional factors that may
impact the Company’s results of operations and financial condition.
The Company does not undertake to update the forward-looking
statements contained herein to conform to actual results or changes
in our expectations, whether as a result of new information, future
events or otherwise.
Contact:
Olivia W. ElliottVice President and Chief Financial
Officer (225) 647-9124
oelliott@crowncrafts.com
or Halliburton Investor
Relations (972) 458-8000
|
|
|
CROWN CRAFTS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF INCOME |
SELECTED FINANCIAL DATA |
In thousands, except percentages and per share
data |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month Periods Ended |
|
Nine-Month Periods Ended |
|
|
December 31, 2017 |
|
January 1, 2017 |
|
December 31, 2017 |
|
January 1, 2017 |
Net sales |
|
$ |
17,476 |
|
$ |
17,262 |
|
$ |
47,584 |
|
$ |
48,670 |
Gross profit |
|
|
5,269 |
|
|
5,639 |
|
|
13,893 |
|
|
14,235 |
Gross profit
percentage |
|
|
30.1% |
|
|
32.7% |
|
|
29.2% |
|
|
29.2% |
Income from
operations |
|
|
1,613 |
|
|
3,063 |
|
|
3,529 |
|
|
6,059 |
Income before income
tax expense |
|
|
1,578 |
|
|
3,088 |
|
|
3,524 |
|
|
6,136 |
Income tax expense |
|
|
1,047 |
|
|
1,227 |
|
|
1,750 |
|
|
2,173 |
Net income |
|
|
531 |
|
|
1,861 |
|
|
1,774 |
|
|
3,963 |
Basic earnings per
share |
|
$ |
0.05 |
|
$ |
0.19 |
|
$ |
0.18 |
|
$ |
0.40 |
Diluted earnings per
share |
|
$ |
0.05 |
|
$ |
0.19 |
|
$ |
0.18 |
|
$ |
0.39 |
|
|
|
|
|
|
|
Weighted Average Shares
Outstanding:
|
|
|
|
|
|
|
Basic |
|
|
10,086 |
|
|
10,031 |
|
|
10,068 |
|
|
10,007 |
Diluted |
|
|
10,090 |
|
|
10,058 |
|
|
10,075 |
|
|
10,040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED BALANCE SHEETS |
SELECTED FINANCIAL DATA |
In thousands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
April 2, 2017 |
|
|
|
Cash and cash
equivalents |
|
$ |
117 |
|
$ |
7,892 |
|
|
|
Accounts receivable,
net of allowances |
|
|
12,764 |
|
|
15,614 |
|
|
|
Inventories |
|
|
22,844 |
|
|
15,821 |
|
|
|
Total current
assets |
|
|
37,830 |
|
|
41,110 |
|
|
|
Finite-lived intangible
assets - net |
|
|
7,750 |
|
|
3,128 |
|
|
|
Goodwill |
|
|
6,863 |
|
|
1,126 |
|
|
|
Total assets |
|
$ |
55,099 |
|
$ |
47,184 |
|
|
|
|
|
|
|
|
|
|
Total current
liabilities |
|
|
13,087 |
|
|
7,573 |
|
|
|
Long-term debt |
|
|
2,311 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity |
|
|
38,745 |
|
|
38,923 |
|
|
|
Total liabilities and
shareholders’ equity |
|
$ |
55,099 |
|
$ |
47,184 |
|
|
|
|
|
|
|
|
|
|
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