CROWN CRAFTS INC
For the period ended Dec 29, 2024. Filed Feb 12, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 29, 2024 · Filed Feb 12, 2025
CRWS$2.45-4.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-29; filed 2024-11-12.
0001437749-24-034309
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-12-29; filed 2025-02-12.
0001437749-25-003486
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 29 previous paragraphs and 34 current paragraphs.
14 unchanged; 15 reworded; 4 added; 0 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
KNOWN TRENDS AND UNCERTAINTIES
Current report
The Company sources its products primarily from foreign contract manufacturers, with the largest concentration being in China. On February 1, 2025, President Trump issued executive orders directing the United States to impose new tariffs on imports from several nations, including China, effective February 4, 2025. The new tariffs likely will increase the cost of products the Company sources from China and affect future shipments from the Company's Chinese-based suppliers. The Company is currently evaluating the potential impact of the imposition of the new tariffs on imports from China to the Company's business and financial condition. The actual impact of the new tariffs is uncertain because it is subject to a number of factors, including duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any countermeasures that China may take and any mitigating actions that may become available.
Current report
On January 2, 2025, the Company and its subsidiaries entered into a letter agreement with CIT with respect to the financing agreement, pursuant to which CIT waived the Company's non-compliance with the fixed charge coverage ratio required under the financing agreement with respect to the Company's fiscal quarters ended September 29, 2024 and December 29, 2024. In addition, the letter agreement modified the financing agreement by changing the Excess Availability (as defined in the Financing Agreement) required to be maintained by the Company with respect to its revolving credit line under the financing agreement to $7,000,000 (from 50% of the outstanding balance of the Company's term loan under the financing agreement). Upon notice to the Company, CIT may reverse such modification.
Current report
On February 10, 2025, the Company and CIT amended the Company's financing agreement with CIT to: (i) waive, with respect to the fiscal year ending March 30, 2025, and through the fiscal year ending March 29, 2026, the Company's obligation to comply with the fixed charge coverage ratio; and (ii) increase the Excess Availability (as defined in the financing agreement) required to be maintained by the Company with respect to its revolving line of credit under the financing agreement from $7,000,000 to $7,500,000, until further notice to the Company by CIT. After such notice, the Excess Availability shall be 50% of the outstanding balance of the Company's term loan under the financing agreement.
Reworded paragraphs (15)
Previous wording
The following table contains the results of operations for the three- and six-month periods ended September 29, 2024 and October 1, 2023 and the dollar and percentage changes for those periods (in thousands, except percentages):
Current wording
The following table contains the results of operations for the three- and nine-month periods ended December 29, 2024 and December 31, 2023 and the dollar and percentage changes for those periods (in thousands, except percentages):
Previous wording
*Net Sales:*Sales increased to $24.5 million for the three months ended September 29, 2024, compared with $24.1 million for the three months ended October 1, 2023, an increase of $331,000, or 1.4%. Sales of bedding and diaper bags increased by $2.2 million, and sales of bibs, toys and disposable products decreased by $1.9 million. Sales increased due to the Acquisition, which generated net sales of $3.4 million of bedding and diaper bags, partially offset by a decline in net sales of bibs, toys and disposable products, due to the loss of a program at a major retailer.
Current wording
*Net Sales:*Sales decreased to $23.3 million for the three months ended December 29, 2024, compared with $23.8 million for the three months ended December 31, 2023, a decrease of $450,000, or 1.9%. Sales of bedding and diaper bags increased by $2.2 million, and sales of bibs, toys and disposable products decreased by $2.6 million. Sales increased due to the impact of the Acquisition, which added $3.8 million in net sales of bedding and diaper bags during the three months ended December 29, 2024. This increase was primarily offset by a decrease in online toy sales as well as the loss of a program at a major retailer.
Previous wording
Sales decreased to $40.7 million for the six months ended September 29, 2024, compared with $41.3 million for the six months ended October 1, 2023, a decrease of $580,000, or 1.4%. Sales of bedding and diaper bags increased by $2.9 million due to the Acquisition and sales of bibs, toys and disposable products decreased by $3.5 million, primarily due to a major retailer reducing inventory levels and the loss of a program at another major retailer.
Current wording
Sales decreased to $64.0 million for the nine months ended December 29, 2024, compared with $65.1 million for the nine months ended December 31, 2023, a decrease of $1.0 million, or 1.6%. Sales of bedding and diaper bags increased by $5.1 million due to the impact of the Acquisition, which added $7.2 million net sales for the nine months ended December 29, 2024, and sales of bibs, toys and disposable products decreased by $6.1 million, primarily due to a major retailer reducing inventory levels and the loss of a program at another major retailer.
Previous wording
Gross Profit: Gross profit increased in amount by $361,000 and increased from 27.3% of net sales for the three-month period ended October 1, 2023 to 28.4% of net sales for the three-month period ended September 29, 2024. This increase is considered to be materially consistent with the prior period and resulted from minor changes in product mix offset by increases in rent at our Compton facility.
Current wording
Gross Profit: Gross profit decreased in amount by $336,000 and decreased from 27.0% of net sales for the three-month period ended December 31, 2023 to 26.1% of net sales for the three-month period ended December 29, 2024. This decrease is considered to be materially consistent with the prior period and resulted from minor changes in product mix and increases in rent at our Compton facility.
Previous wording
Gross profit decreased in amount by $415,000 and decreased from 27.5% of net sales for the six-month period ended October 1, 2023 to 26.9% of net sales for the six-month period ended September 29, 2024. The decrease is considered to be materially consistent with the prior period and relates to an increase in rent at our Compton facility.
Current wording
Gross profit decreased in amount by $751,000 and decreased from 27.3% of net sales for the nine-month period ended December 31, 2023 to 26.6% of net sales for the nine-month period ended December 29, 2024. The decrease in the gross profit percentage is considered to be materially consistent with the prior period and primarily relates to an increase in rent at our Compton facility.
Previous wording
Marketing and Administrative Expenses: Marketing and administrative expenses increased by $1.4 million and increased from 16.7% of net sales for the three-month period ended October 1, 2023 to 22.3% of net sales for the three-month period ended September 29, 2024. The current year period includes $788,000 in acquisition costs as well as increased marketing and administrative costs associated with the Acquisition.
Current wording
Marketing and Administrative Expenses: Marketing and administrative expenses increased by $290,000 and increased from 17.3% of net sales for the three-month period ended December 31, 2023 to 18.8% of net sales for the three-month period ended December 29, 2024. The current year period includes $186,000 in acquisition costs as well as increased marketing and administrative costs associated with the Acquisition.
Previous wording
Marketing and administrative expenses increased by $1.6 million and increased from 19.6% of net sales for the six-month period ended October 1, 2023 to 23.9% of net sales for the six-month period ended September 29, 2024. The current year period includes $244,000 associated with the closure of the Company’s subsidiary in the United Kingdom and $903,000 in costs associated with the Acquisition.
Current wording
Marketing and administrative expenses increased by $1.9 million and increased from 18.7% of net sales for the nine-month period ended December 31, 2023 to 22.0% of net sales for the nine-month period ended December 29, 2024. The current year period includes $244,000 associated with the closure of the Company’s subsidiary in the United Kingdom and $1.1 million in costs associated with the Acquisition.
Previous wording
*Income Tax Expense:*The Company’s provision for income taxes is based upon an estimated annual effective tax rate (“ETR”) from continuing operations of 22.4% for the six-month period ended September 29, 2024, as compared with an estimated annual ETR from continuing operations of 21.6% for the six-month period ended October 1, 2023.
Current wording
*Income Tax Expense:*The Company’s provision for income taxes is based upon an estimated annual effective tax rate (“ETR”) from continuing operations of 22.4% for the nine-month period ended December 29, 2024, as compared with an estimated annual ETR from continuing operations of 21.4% for the nine-month period ended December 31, 2023.
Previous wording
As a result of the consideration of the relevant information regarding the state portion of its income tax provision, the Company recorded discrete reserves for unrecognized tax liabilities of $3,000 and $20,000 during the three-month period ended September 29, 2024 and October 1, 2023, respectively, and $3,000 and $25,000 during the six-month period ended September 29, 2024, and October 1, 2023, respectively, in the unaudited condensed consolidated statements of income. The Company also recorded discrete income tax charges of $14,000 and $16,000 during the three months ended September 29, 2024 and October 1, 2023, respectively, and $34,000 and $43,000 during the six-month periods ended September 29, 2024 and October 1, 2023, respectively, to reflect the effects of the tax shortfalls and excess tax benefits arising from the forfeiture and expiration of stock options and the vesting of non-vested stock.
Current wording
The Company recorded discrete income tax charges of $34,000 and $43,000 during the nine-month periods ended December 29, 2024 and December 31, 2023, respectively, to reflect the effects of the tax shortfalls and excess tax benefits arising from the forfeiture and expiration of stock options and the vesting of non-vested stock. The Company recorded discrete income tax charges of $50,000 and $19,000 during the nine-month periods ended December 29, 2024 and December 31, 2023, respectively, to reflect adjustments to prior year tax provisions.
Previous wording
The ETR on continuing operations and the discrete income tax charges and benefits set forth above resulted in an overall provision for income taxes of 27.3% and 24.0% for the six-month periods ended September 29, 2024 and October 1, 2023, respectively.
Current wording
The ETR on continuing operations and the discrete income tax charges and benefits set forth above resulted in an overall provision for income taxes of 29.0% and 23.3% for the nine-month periods ended December 29, 2024 and December 31, 2023, respectively.
Previous wording
Net cash provided by operating activities increased from $4.7 million for the six-month period ended October 1, 2023 to $7.1 million for the six-month period ended September 29, 2024. The increase in the current year was partially the result of an increase in accounts payable in the current year that was $4.0 million higher than the decrease in the prior year and an increase in accrued liabilities in the current year that was $1.2 million higher than the increase in the prior year. This increase was partially offset by a decrease in accounts receivable in the current year that was $710,000 lower than the decrease in the prior year and a $1.6 million decrease in net income from the prior year to the current year.
Current wording
Net cash provided by operating activities increased from $4.1 million for the nine-month period ended December 31, 2023 to $7.0 million for the nine-month period ended December 29, 2024. The increase in the current year was partially the result of an increase in accounts payable in the current year that was $3.7 million higher than the decrease in the prior year and an increase in accrued liabilities in the current year that was $800,000 higher than the increase in the prior year. This increase was partially offset by a decrease in net income of $2.5 million from the prior year to the current year.
Previous wording
Net cash used in investing activities increased from $51,000 in the prior year to $16.9 million in the current year. The increase in the current year is primarily due to the $16.4 payment made in the current year to complete the Acquisition.
Current wording
Net cash used in investing activities increased from $69,000 in the prior year to $17.0 million in the current year. The increase in the current year is primarily due to the $16.4 payment made in the current year to complete the Acquisition.
Previous wording
Net cash used in financing activities was $4.5 million for the six-month period ended October 1, 2023 compared with $10.9 million in cash provided by financing activities for the six-month period ended September 29, 2024. The Company incurred net borrowings under its revolving line of credit of $8.3 million and a term loan of $8.0 million that did not occur in the prior period, such borrowings primarily being required to fund the Acquisition.
Current wording
Net cash used in financing activities was $5.1 million for the nine-month period ended December 31, 2023 compared with $10.2 million in cash provided by financing activities for the nine-month period ended December 29, 2024. The Company incurred net borrowings under its revolving line of credit of $8.3 million and a term loan of $8.0 million that did not occur in the prior period, such borrowings primarily being required to fund the Acquisition.
Previous wording
As of September 29, 2024, the balance on the revolving line of credit was $13.1 million, there was no letter of credit outstanding and $13.6 million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.
Current wording
As of December 29, 2024, the balance on the revolving line of credit was $13.7 million, there was no letter of credit outstanding and $15.3 million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.
Previous wording
CIT bears credit losses with respect to assigned accounts receivable from approved shipments, while the Company bears the responsibility for adjustments from customers related to returns, allowances, claims and discounts. CIT may at any time terminate or limit its approval of shipments to a particular customer. If such a termination or limitation occurs, then the Company either assumes (and may seek to mitigate) the credit risk for shipments to the customer after the date of such termination or limitation or discontinues shipments to the customer. Factoring fees, which are included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, amounted to $94,000 and $92,000 for the three-month periods ended September 29, 2024 and October 1, 2023, respectively, and amounted to $168,000 and $159,000 for the six-month periods ended September 29, 2024 and October 1, 2023, respectively.
Current wording
CIT bears credit losses with respect to assigned accounts receivable from approved shipments, while the Company bears the responsibility for adjustments from customers related to returns, allowances, claims and discounts. CIT may at any time terminate or limit its approval of shipments to a particular customer. If such a termination or limitation occurs, then the Company either assumes (and may seek to mitigate) the credit risk for shipments to the customer after the date of such termination or limitation or discontinues shipments to the customer. Factoring fees, which are included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, amounted to $115,000 and $106,000 for the three-month periods ended December 29, 2024 and December 31, 2023, respectively, and amounted to $283,000 and $265,000 for the nine-month periods ended December 29, 2024 and December 31, 2023, respectively.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
As a result of the consideration of relevant information regarding its income tax provision, the Company recorded discrete reserves for unrecognized tax liabilities of $46,000 and $9,000 during the three-month period ended December 29, 2024 and December 31, 2023, respectively, and $49,000 and $34,000 during the nine-month period ended December 29, 2024, and December 31, 2023, respectively, in the unaudited condensed consolidated statements of income.