<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
<TABLE>
<C> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
(FEE REQUIRED)
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES ACT OF 1934 (NO FEE REQUIRED)
</TABLE>
FOR THE FISCAL YEAR ENDED MARCH 31, 1996 COMMISSION FILE NO. 1-7604
---------------------
CROWN CRAFTS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
GEORGIA 58-0678148
(State of Incorporation) (I.R.S. Employer Identification No.)
1600 RIVEREDGE PARKWAY, 30328
SUITE 200 (Zip Code)
ATLANTA, GEORGIA
(Address of principal executive offices)
</TABLE>
Registrant's Telephone Number, including area code: (770) 644-6400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON STOCK, $1.00 PAR VALUE
(TITLE OF CLASS)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____
As of June 14, 1996, 7,944,201 shares of Common Stock were outstanding, and
the aggregate market value of the Common Stock (based upon the NYSE closing
price of these shares on that date) held by persons other than Officers,
Directors, the Company's Employee Stock Option Plan, and 5% shareholders was
approximately $54,820,000.
DOCUMENTS INCORPORATED BY REFERENCE:
CROWN CRAFTS, INC., PROXY STATEMENT IN CONNECTION WITH ITS ANNUAL MEETING
OF SHAREHOLDERS ON AUGUST 8, 1996 (PART III)
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<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Crown Crafts, Inc., a Georgia corporation which was founded in 1957,
operates, both directly and indirectly through its subsidiaries, in a single
business segment within the textile industry. Crown Crafts, Inc. and its
subsidiaries (collectively, the "Company") are principally engaged in the
design, manufacture, and sale of home furnishings products. These products are
marketed under a variety of Company-owned trademarks, under trademarks licensed
from others, without trademarks as unbranded merchandise and with customers'
private labels.
The Company completed four acquisitions during its 1996 fiscal year which
ended March 31, 1996. In April 1995, the Company acquired privately-held
Textile, Inc. ("Textile"), a contract manufacturer of jacquard-woven products.
Subsequent to this acquisition, Textile's manufacturing capacity was used
primarily to supplement the Company's existing manufacturing capacity for woven
throws.
In October 1995, the Company acquired privately-held The Red Calliope and
Associates, Inc. ("Red Calliope"). Red Calliope is a designer, marketer and
distributer of infant bedding products and related accessories. The Company
did not manufacture or sell infant bedding prior to this acquisition.
In December 1995, the Company acquired KKH Corporation, a marketer of
patented animal-shaped pillows and similar products.
In January 1996, the Company acquired Churchill Weavers, Inc. ("Churchill
Weavers"), a manufacturer of hand-woven luxury adult and infant throws and
ladies fashion accessories.
Prior to fiscal 1996, the Company's operations were highly integrated.
Since these acquisitions, Red Calliope and Churchill Weavers have, however,
operated largely on a stand-alone basis.
PRODUCTS
The Company offers a broad range of textile home furnishings products,
including adult and infant comforters, comforter sets, infant crib sets and
accessories, sheets, pillowcases, pillow shams, bedskirts, duvet covers, daybed
sets, window treatments, decorative pillows, coverlets, bedspreads, rugs and
throws. These products are made from a variety of fabrics such as 100% cotton,
cotton/polyester blend, fleece, denim, velvet, corduroy and wool.
The Company offers its bedcovering products in a wide variety of styles
and patterns, from comforters to woven bedspreads and
<PAGE> 3
from solid colors to designer prints. The Company believes the trend toward
coordination of the bedroom will remain strong and expects to continue
its emphasis on comforter sets with coordinated sheets and accessories, and on
woven products such as matelasse coverlets.
The Company manufactures throws in a variety of colors and designs.
Throws may be constructed of either 100% cotton, 100% acrylic, cotton/acrylic
blends, rayon, wool or chenille.
Adult comforters and accessories are produced primarily at the Company's
facilities in Roxboro, North Carolina (the "Roxboro Plant"). Infant bedding
products, which are marketed by Red Calliope, are produced by a variety of
independent contractors in the greater Los Angeles, California, area. All
comforters are filled with polyester fiberfill.
The Company's facilities in Dalton, Chatsworth and Calhoun, Georgia
produce and warehouse the majority of jacquard-woven products. Throws are also
manufactured at the Textile facility in Ronda, North Carolina, and by Churchill
Weavers at its facility in Berea, Kentucky. Some of the Company's throws,
including all printed and fleece throws, are also manufactured in Mexico by
independent companies.
PRODUCT DESIGN AND STYLING
The Company's research and development expenditures focus primarily on
product design and styling. The Company believes styling and design are key
components to its success. In recent years the Company has significantly
increased the number of people and other resources dedicated to this area. The
Company's designs include traditional, contemporary, textured and whimsical
patterns. The Company designs and manufactures products across a broad
spectrum of retail price points. The Company is continually developing new
designs for both bedcoverings and throws.
The Company's designers and stylists work closely with the marketing staff
to develop new designs. The Company obtains its designs from numerous sources,
including graphic artists, decorative fabric manufacturers, apparel designers,
the Company's employees and museums. The Company utilizes computer aided
design systems to increase its design flexibility and reduce costs. In
addition, these systems significantly shorten the time for responding to
customer needs and changing market trends. The Company creates many designs for
exclusive sale by certain of its customers.
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SALES AND MARKETING; CUSTOMERS
The Company markets its products through a national sales force consisting
of salaried sales executives and employees and independent commissioned sales
representatives. Independent representatives are used most significantly in
sales to the gift trade through Goodwin Weavers and Churchill Weavers, and to
the infant bedding market through Red Calliope. Sales outside the United
States and Canada are primarily through distributors.
The Company's customers consist principally of department stores, chain
stores, mass merchants, specialty home furnishings stores, wholesale clubs,
gift stores and catalogue and direct mail houses. During the fiscal years
ended March 31, 1996, April 2, 1995 and April 3, 1994, sales to Wal-Mart
Stores, Inc. accounted for 18.2%, 17.3% and 16.1% of net sales, respectively.
The Company's sales to JCPenney Company constituted 11.8% of net sales in
fiscal 1994. During fiscal 1995 and 1996, sales to JCPenney Company were less
than 10% of the Company's net sales. The loss of any major customers would have
a material adverse effect on the Company's operating results. The Company
believes, however, that its relationships with both Wal-Mart and JCPenney are
excellent and that the loss of either customer is unlikely.
The Company's primary showroom and sales office is located in New York
City. Sales offices are also maintained in Chicago, San Francisco, Atlanta,
Boston, Dallas, Tyler, Texas, and Bellevue, Washington. An additional showroom
is located in the Company's Atlanta corporate headquarters location. The
Goodwin Weavers division also has a showroom in the Atlanta Merchandise Mart.
Red Calliope maintains a showroom in Dallas, Texas.
The Company sells the majority of its products to retailers for resale to
consumers. The Company generally introduces new products to the retail trade
during the industry's April and October home textile markets. Initial shipments
of successful new designs generally occur at least six months after the product
introduction as more conservative buyers follow the lead of market innovators.
New product introductions for the gift shop trade are concentrated in
January-March and June-August when Goodwin Weavers and Churchill Weavers
participate in numerous local and regional gift shows. Red Calliope introduces
products once each year during the November Juvenile Products Manufacturers'
Association trade show. Private label products manufactured by the Company are
introduced throughout the year.
The Company uses visually appealing and informative packaging,
point-of-sale displays and advertising materials for retailers. Most of these
are produced in the Company's own print shop, which offers design, typesetting
and finishing services. The Company
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also regularly advertises its products in publications directed to the
trade.
MANUFACTURING
The Company has made significant investments in modernization and
expansion to lower manufacturing costs, maximize design flexibility, improve
quality and service, and increase productive capacity.
The Company produces adult comforters and accessories at the Roxboro
Plant. The Roxboro Plant utilizes an automated warehouse and distribution
system which allows the Company to reduce inventories, improve physical control
over inventories, reduce order fulfillment lead times, and provide enhanced
levels of service.
The Company produces its jacquard-woven products at its weaving mills in
Dalton, Georgia, and Ronda, North Carolina. A new 90,000 square-foot weaving
facility in Dalton, Georgia, became operational in October 1995. The products
are then finished, packed and shipped from the Calhoun, Georgia, facilities. In
fiscal 1996, the Company completed the expansion of its warehouse and
distribution facility in Calhoun, Georgia. This expanded warehouse and
distribution center has enabled the Company to continue to increase its
efficiency and improve on-time deliveries of its products. The Company also
uses a warehouse and distribution center in Chatsworth, Georgia.
OUTLET STORES
The Company markets primarily close-out and irregular products through its
outlet stores which are located in Calhoun, Georgia, Roxboro, North Carolina,
Blowing Rock, North Carolina, and in several outlet malls and resort areas
located primarily in the southeastern United States. In fiscal 1996, less than
4% of the Company's sales were made through its outlet stores.
RAW MATERIALS
The principal raw materials used in the manufacture of adult and infant
comforters, sheets and accessories are wide-width and narrow printed and solid
color cotton and polycotton fabrics, and polyester fibers used as filling
material. The principal raw materials used in the manufacture of
jacquard-woven products are natural-color and pre-dyed 100% cotton yarns.
Although the Company usually maintains supply relationships with only a limited
number of suppliers, the Company believes these raw materials presently are
available from several sources in quantities sufficient to meet the Company's
requirements.
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The Company uses significant quantities of cotton, either in the form of
cotton yarn, cotton fabric or polycotton fabric. Cotton is subject to ongoing
price fluctuations. The price fluctuations are a result of cotton being an
agricultural product subject to weather patterns, disease and other factors as
well as supply and demand considerations, both domestically and
internationally. To reduce the effect of potential price fluctuations, the
Company often makes commitments for future purchases of cotton yarns and
fabrics up to a year before delivery. Nonetheless, significant increases in
the price of cotton could adversely affect the Company's operations.
SEASONALITY, INVENTORY MANAGEMENT
Historically, the Company has experienced a seasonal sales pattern, with a
greater sales volume in each of the last three fiscal quarters of the year
(July through March). This seasonality results from retailers having higher
sales in the second half of the year.
The Company carries normal inventory levels to meet delivery requirements
of customers. Customer returns of merchandise shipped are not material.
Inventories are valued at the lower of cost or market. Cost is determined on a
first-in, first-out basis. Excluding the inventories of companies acquired
during fiscal 1996, inventories declined to $40,100,000 at March 31, 1996 from
$44,900,000 at April 2, 1995.
BACKLOG ORDERS
The Company's backlog of unfilled customer orders believed by management
to be firm were $19,279,000 and $22,510,000 at May 24, 1996 and May 26,
1995(1), respectively. The majority of these unfilled orders are scheduled to
be shipped within eight weeks.
The Company believes that its backlog of unfilled orders is not a
meaningful indicator of its future sales volume, as customers have increasingly
followed the practice of placing orders as close to the requested delivery date
as possible. Many orders are placed using electronic data interchange, and the
Company fills many of such orders on a quick response basis.
TRADEMARKS, COPYRIGHTS AND PATENTS
The Company's products are marketed in part under well-known trademarks.
The Company considers its trademarks to be of material
- -------------------
(1) To enhance comparability, backlog orders for May, 1995 have been
adjusted to include backlog orders of companies acquired during fiscal 1996.
5
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importance to its business. Adult comforters and accessories primarily
carry the trademark Crown Crafts(R). The majority of throws carry the
trademarks Crown Crafts(R) and Goodwin Weavers(R). Infant bedding products
carry the trademarks Red Calliope(R) and Little Bedding(R). Protection for
these marks is obtained through domestic and foreign registrations. Also
important to the Company is the trademark Royal Sateen(R), which was developed
in a joint effort with Kitan Consolidated, Ltd. of Israel. Kitan is the
registered owner of the mark and the Company is the exclusive marketer of Royal
Sateen products in the United States and other parts of the Western Hemisphere.
In addition, certain products are manufactured and sold pursuant to
licensing agreements that include, among others: Bob Timberlake(TM), Colonial
Williamsburg(R), Department 56(R), Warner Bros.(R), Hallmark(R), Ungaro(R),and
Disney(R). The licensing agreements for the Company's designer brands
generally are for a term of 3 to 6 years, and may or may not be subject to
renewal. No one of these licenses has accounted for more than 10% of the
Company's total sales volume during any of the last five fiscal years.
Although revenue has not been material, the Company has licensed and has sold
fabric for certain of its more successful designs to manufacturers of other
products such as bath accessories, table linens, wallpaper borders and rugs.
The Company believes that its licensing activities, both as a licensee and
licensor, will continue to increase in importance as the Company grows.
Many of the designs used by the Company are copyrighted by other parties
including trademark licensors and are available to the Company through
copyright licenses. Other designs are the subject of copyrights and design
patents owned by the Company.
COMPETITION
The textile industry, including the market for home furnishings products,
is highly competitive. The Company competes with a variety of manufacturers,
many of which are vertically-integrated textile companies with substantially
greater resources than the Company, and many of which are of similar size to
the Company. Competitors may have customer relationships which may be superior
to those of the Company and may have substantially greater resources. The
Company believes that it is the sixth largest domestic manufacturer of bed
coverings, including comforters, comforter sets and jacquard-woven bedspreads,
with a total market share of approximately 8%. The Company also believes that
it is the largest domestic manufacturer of throws with a total market share of
approximately 40%.
The Company competes on the basis of quality, design, price, service and
packaging. Except for acrylic throws, luxury linens, and matelasse coverlets
and bedspreads, the Company's products have
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not experienced significant competition from imports. The Company
believes that its ability to implement future price increases for its products
may be limited by current or future overcapacity in the domestic textile
industry.
GOVERNMENT REGULATION; ENVIRONMENTAL CONTROL
The Company is subject to various federal, state and local environmental
laws and regulations which regulate, among other things, the discharge,
storage, handling and disposal of a variety of substances and wastes. The
Company's operations are also governed by laws and regulations relating to
employee safety and health, principally the Occupational Safety and Health
Administration Act and regulations thereunder.
The Company believes that it currently complies in all material respects
with applicable environmental, health and safety laws and regulations.
Although the Company believes that future compliance with such existing laws or
regulations will not have a material adverse effect on its capital
expenditures, earnings or competitive position, there can be no assurances that
such requirements will not become more stringent in the future or that the
Company will not incur significant costs in the future to comply with such
requirements.
EMPLOYEES
At June 14, 1996, the Company had 2,220 employees. None of the Company's
employees is represented by a labor union, and the Company considers its
relationship with its employees to be good. The Company attracts and maintains
qualified personnel by paying competitive salaries and benefits and offering
opportunities for advancement.
INTERNATIONAL SALES
Sales to customers in foreign countries are not currently material to the
Company's business. The Company believes, however, its presence in foreign
countries will increase in the future as a result of, among other factors, the
passage of NAFTA and the expansion of its sales efforts in Europe, Japan,
Mexico and Australia. The Company had anticipated substantial sales growth in
Mexico in fiscal 1996 in connection with its strategic alliance with the
Mexican textile company, Grupo Textil San Marcos. As a result of the
devaluation of the peso and the resulting impact on the Mexican economy,
however, the Company made only a minor amount of export sales to Mexico during
fiscal 1996.
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ITEM 2. PROPERTIES
The Company's headquarters are located in executive offices in Atlanta,
Georgia. A showroom is also located in these offices. The Company occupies
approximately 41,213 square feet at this location under leases that expire June
29, 2002 and September 30, 2000.
The following table summarizes certain information regarding the Company's
principal properties.
<TABLE>
<CAPTION>
Approximate Owned/
Location Use Square Feet Leased
- -------- --- ----------- ------
<S> <C> <C> <C>
Berea, Kentucky Offices, manufacturing, warehouse, 38,000 Owned
and distribution facilities and retail
store
Calhoun, Georgia Two buildings, housing offices, 267,000 Owned
manufacturing facilities, sample
department, print shop and factory
outlet store
Calhoun, Georgia Warehouse and distribution center 233,000 Owned
Chatsworth, Georgia Manufacturing facility, warehouse 115,000 Owned
and distribution center
Compton, California Offices, warehouse and distribution 157,400 Leased (1)
center
Dalton, Georgia Two buildings housing 161,000 Owned
manufacturing facilities
Ronda, North Carolina Two buildings, housing offices, 62,820 Owned
manufacturing facility and
warehouse
Atlanta, Georgia Executive offices and showroom 41,213 Leased (2)
Roxboro, North Three buildings, housing 424,000 Owned
Carolina manufacturing facilities, warehouse
and distribution centers,
administrative offices and factory
outlet store
Roxboro, North Five buildings, housing manufacturing 348,000 Leased (3)
Carolina facilities, warehouses and distribution
facilities
Blowing Rock, North Three buildings, housing administrative 21,000 Owned
Carolina and sales offices, and factory
outlet store
</TABLE>
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<TABLE>
<S> <C> <C>
New York, New York Sales and design offices and showroom 23,000 Leased(4)
</TABLE>
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(1) Lease expires May 31, 2001 (renewable for one two-year period and one
three-year period)
(2) Leases expire June 29, 2002 and September 30, 2000.
(3) Leases expire as follows:
(a) 75,000 square feet on February 28, 2005; (b) 50,000 square feet on
September 30, 1997 (renewable for one five-year period); and (c) 223,000
square feet on April 30, 1998 (renewable for one five-year period).
(4) Leases expire December 31, 1996. The Company is currently in the final
stage of lease negotiations for appropriate space located in Midtown
Manhattan for its sales and design offices and showroom.
(5) Lease term commences January 1, 1997 and expires April 30, 2007 (renewable
for up to two additional five-year periods).
The Company also leases space for its various sales offices and outlet
stores.
Management believes that its properties are suitable for the purposes for
which they are used, are in generally good condition, substantially utilized
and provide adequate production capacity for current and anticipated future
operations.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is a party to various legal proceedings
arising in the ordinary course of business. The Company is not currently
engaged in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended March 31, 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company is authorized by its Articles of Incorporation to issue up to
50,000,000 shares of capital stock, all of which are designated Common Stock,
par value $1.00 per share.
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COMMON STOCK
The Company's common stock (the "Common Stock") is traded on the New York
Stock Exchange ("NYSE") under the symbol "CRW". The following table presents
quarterly information on the price range of the Company's Common Stock for the
fiscal years ended April 2, 1995 and March 31, 1996. This information
indicates the high and low sale prices as reported by the NYSE.
<TABLE>
<CAPTION>
QUARTER High Low
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<S> <C> <C>
FISCAL 1996
First Quarter $18 $16
Second Quarter 16-5/8 11-1/2
Third Quarter 13-3/8 11-1/4
Fourth Quarter 11-3/4 9-1/2
FISCAL 1995
First Quarter $21-3/8 $17-7/8
Second Quarter 19-3/4 14-1/8
Third Quarter 16-3/8 14-3/8
Fourth Quarter 17-1/8 14-3/4
</TABLE>
As of June 14, 1996 there were issued and outstanding 7,944,201 shares of
the Company's Common Stock held by approximately 1,750 beneficial holders. The
estimated number of beneficial holders does not reflect the approximately 1,900
individual employee accounts in the Company's Employee Stock Ownership Plan.
At June 14, 1996, the Company's Common Stock closed at $9.75.
In fiscal 1996, the Company continued its policy, begun in February 1989,
of paying dividends on a quarterly basis. The Company paid a dividend of $0.03
per share on its Common Stock on June 20, 1995, September 19, 1995, December
19, 1995 and March 26, 1996. Dividends paid by the Company on its Common Stock
in the future will depend upon the earnings and financial condition of the
Company. The Company presently anticipates paying dividends for the
foreseeable future.
ITEM SELECTED FINANCIAL DATA
The selected financial data presented below are derived from the Company's
financial statements for the five years ended March 31, 1996. The data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and
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Results of Operations" and the financial statements and related notes
included elsewhere in this Annual Report.
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------------------
($ in thousands, except per share amounts.)
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FOR THE YEAR March 31, April 2, April 3, March 28, March 29,
1996 1995 1994* 1993 1992
<S> <C> <C> <C> <C> <C>
Net sales $219,002 $210,963 $187,335 $151,256 $122,698
Gross profit 42,452 46,731 37,998 29,885 26,635
Earnings from
operations 10,625 18,878 15,374 11,377 10,940
Net earnings 3,947 11,050 9,010 7,339 6,313
Net earnings per
share 0.49 1.31 1.08 0.89 0.91
Cash dividends per
share 0.12 0.12 0.12 0.12 0.12
* Fiscal 1994 contained 53 weeks
AT YEAR END
Total assets $185,698 $134,031 $123,348 $108,641 $ 88,564
Long-term debt 69,300 5,000 10,000 15,000 17,000
Shareholders' equity 83,017 87,000 75,385 66,325 59,225
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO
FISCAL YEAR ENDED APRIL 2, 1995
Consolidated net sales increased $8.0 million, or 3.8 percent, to $219.0
million in 1996. The increase was attributable to incremental net sales of
$15.7 million from the four businesses acquired by the Company during 1996 and
an increase in net sales of woven products, offset by declines in net sales of
comforters, comforter accessories and imported quilts.
Gross profit as a percentage of net sales declined to 19.4 percent in 1996
from 22.2 percent in 1995, primarily due to
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capacity underutilization at the Company's manufacturing facilities for
jacquard-woven products and for comforters and related accessories. This
underutilization was the result of less than expected demand for the Company's
products, as an extremely weak retailing environment prevailed for most of the
fiscal year. The Company further reduced its production schedules, particularly
during the fourth quarter, as part of a plan to reduce its inventory levels.
Retail demand for jacquard-woven products, comforters and related accessories
has remained sluggish in April and May, indicating that the Company's
manufacturing capacity will continue to exceed demand for at least a portion of
the 1997 fiscal year.
Marketing and administrative expenses increased $4.0 million, or 14.3
percent, to $31.8 million in 1996. Of the increase, $2.7 million represents
the incremental marketing and administrative expenses of the businesses
acquired by the Company during 1996. The remaining increase was primarily
attributable to increases in staffing costs and advertising, the total of which
was partially offset by a $1.3 million decrease in executive incentive
compensation payments.
Interest costs incurred increased to $4.2 million (including capitalized
interest of $402,000) in 1996 from a total of $2.1 million (including
capitalized interest of $125,000) in 1995. This increase was primarily the
result of a substantial increase in the overall levels of debt outstanding.
Such higher debt levels were the result of capital spending ($23.7 million),
acquisition activity ($20.5 million) and purchases of treasury stock ($7.5
million). See "Financial Position, Liquidity and Capital Resources" below.
The effective income tax rate increased to 39.6 percent in 1996 from 36.8
percent in 1995, partially because of the increase of $352,000 in financial
statement expenses for nondeductible amortization of goodwill, and in part due
to the higher state and local income tax rates applicable to acquired
companies. These higher state and local rates were partially offset by the
availability and utilization of employment-related tax credits in certain other
states.
FISCAL YEAR ENDED APRIL 2, 1995 COMPARED TO
FISCAL YEAR ENDED APRIL 3, 1994
Consolidated net sales increased $23.6 million, or 12.6 percent, to $211.0
million in 1995. Higher net sales of woven throws, woven bedspreads and sheets
were partially offset by declines in net sales of comforters and quilts.
Gross profit as a percentage of net sales increased to 22.2 percent in
1995 from 20.3 percent in 1994, as new automated
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manufacturing, warehousing and distribution facilities were operated
more efficiently.
Marketing and administrative expenses increased $5.2 million, or 23.1
percent, to $27.9 million in 1995. The increase was primarily attributable to
increased staffing and occupancy costs incurred to support the growth in net
sales.
Interest costs incurred increased to $2.1 million (including capitalized
interest of $125,000) in 1995 from a total of $2.0 million (including
capitalized interest of $407,000) in 1994. The increased costs were the result
of an increase in the overall levels of debt outstanding.
The effective income tax rate increased to 36.8 percent in 1995 from 36.2
percent in 1994 due to higher effective state income tax rates.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
The Company acquired four businesses during fiscal 1996. On April 3,
1995, the Company acquired all of the outstanding stock of Textile, Inc., a
contract manufacturer of jacquard-woven products. Subsequent to the
acquisition, Textile, Inc. was utilized primarily to supplement the Company's
manufacturing capacity for woven throws. On October 31, 1995, the Company
acquired all of the outstanding stock of The Red Calliope and Associates, Inc.,
a leading designer and marketer of infant bedding products and related
accessories. This acquisition marked the Company's entry into the infant home
furnishings market. On December 19, 1995, the Company acquired all of the
outstanding stock of KKH Corporation, a designer and marketer of imported
patented animal-shaped children's pillows and similar products. On January 4,
1996, the Company acquired all of the outstanding stock of Churchill Weavers,
Inc., a manufacturer and marketer of hand-woven luxury textile products. The
total consideration for these four acquisitions, net of cash acquired, was
$20.5 million. The Company disbursed substantially all of such purchase
consideration in cash prior to the end of fiscal 1996. As part of its strategy
to grow sales and earnings, the Company expects to continue to consider
acquisitions of other home furnishings businesses.
The Company also completed two significant construction projects during
fiscal 1996. Approximately mid-year, a 90,000 square foot weaving facility in
Dalton, Georgia, began operations, and the Company completed an expansion of
its distribution center for jacquard-woven products in Calhoun, Georgia.
Capital expenditures totaled $23.7 million during fiscal 1996, the highest
annual level in the Company's history.
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The Company believes that its facilities are among the most modern in the
textile home furnishings industry, and that its production capacity is
sufficient to meet current and projected demand over the next fiscal year.
Accordingly, the Company expects capital spending to decline to less than $10
million for fiscal 1997.
During fiscal 1996, the Company's Board of Directors authorized the
purchase of up to 1,000,000 shares of its outstanding common stock. The
Company has purchased a total of 636,200 shares of its stock for a total of
$7.5 million. No decision has been made as to whether the Company will acquire
the remaining shares covered under this authorization.
The Company's fiscal 1996 cash needs, which were driven by the
acquisitions, capital expenditures and common stock purchases described herein,
were met primarily by outside financing sources. On August 25, 1995, the
Company entered into long-term unsecured revolving credit facilities totaling
$30 million with two commercial banks. The variable interest rates for funds
borrowed under these facilities are based on LIBOR. At March 31, 1996,
borrowings of $19.0 million were outstanding under these facilities at a
weighted average interest rate of 5.9 percent. The Company pays facility fees
on the unused portions of these committed credit lines. Among other covenants,
these bank facilities contain a requirement that the Company maintain minimum
levels of shareholders' equity, one effect of which is to restrict the payment
of cash dividends. At March 31, 1996, retained earnings of approximately $8.6
million were available for dividend payments. Other covenants place
restrictions on the amounts the Company may expend on acquisitions and
purchases of treasury stock. On October 12, 1995, the Company entered into a
$50 million note purchase and private shelf agreement with an insurance
company. An initial borrowing of $25 million was made on that date, and the
remaining $25 million was borrowed on January 25, 1996. The weighted average
interest rate for the entire amount borrowed was 6.9 percent. Repayments will
be made in equal annual installments of $7.1 million each, commencing October
12, 1999, with the final installment due October 12, 2005. In addition, the
Company has short-term uncommitted credit lines totaling $40 million. The
Company believes that cash generated by operations and borrowings under its
existing credit facilities will be sufficient to meet its anticipated
requirements for capital expenditures, annual debt repayments and operating
expenses.
To reduce its exposure to credit losses and to enhance its cash flow
forecasts, the Company factors the majority of its trade accounts receivable.
The Company's factor establishes customer credit lines, and accounts for and
collects receivables balances. The factor remits payment to the Company on the
due dates of the factored invoices. The Company does not take advances against
its
14
<PAGE> 16
factored receivables balances. The factor assumes all responsibility for
credit losses on sales within approved credit lines, but may deduct from its
remittances to the Company the amounts of customer deductions for returns,
allowances, disputes and discounts. The Company's factor may, at any time,
terminate or limit its approval of shipments to a particular customer. If such
a termination occurs, the Company may either assume the credit risks for
shipments after the date of such termination or cease shipments to such
customer.
OTHER MATTERS
In March 1995, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of. SFAS No. 121 addresses issues surrounding the measurement and
recognition of losses when the value of certain assets has been deemed to be
permanently impaired. This Statement will be effective for the Company's 1997
fiscal year. The Company does not expect SFAS No. 121 to have a material
impact on the Company's financial position or results of operations.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 establishes a method of accounting for stock
compensation plans based on fair value, but also permits companies to continue
to account for stock options under the intrinsic value method established by
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. The Company plans to continue to account for stock-based
compensation following the intrinsic value method. Beginning in fiscal 1997,
SFAS No. 123 requires disclosure in the notes to financial statements of pro
forma net income and earnings per share as if the alternative method
established in SFAS No. 123 had been used to measure compensation cost.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages F-1 through F-12 herein.
15
<PAGE> 17
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Audited Financial Statements: Page
Report of Independent Auditors F-2
Consolidated Balance Sheets as of F-3
March 31, 1996 and April 2, 1995
Consolidated Statements of Earnings F-4
for the Three Fiscal Years in the
Period Ended March 31, 1996
Consolidated Statements of Changes in F-5
Shareholders' Equity for the Three Fiscal
Years in the Period Ended March 31, 1996
Consolidated Statements of Cash Flows F-6
for the Three Fiscal Years in the
Period Ended March 31, 1996
Notes to Consolidated Financial F-7
Statements
Note #1 - SIGNIFICANT ACCOUNTING POLICIES
Note #2 - ACQUISITIONS
Note #3 - INVENTORIES
Note #4 - FINANCING ARRANGEMENTS
Note #5 - INCOME TAXES
Note #6 - RETIREMENT PLANS
Note #7 - STOCK OPTIONS
Note #8 - MAJOR CUSTOMERS
Note #9 - COMMITMENTS
Supplemental Financial Information:
Selected Quarterly Financial Information (unaudited) F-12
</TABLE>
F - 1
<PAGE> 18
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of Crown Crafts, Inc.:
We have audited the accompanying consolidated balance sheets of Crown Crafts,
Inc. and subsidiaries as of March 31, 1996 and April 2, 1995, and the related
consolidated statements of earnings, changes in shareholders' equity and cash
flows for each of the three years in the period ended March 31, 1996. Our
audits also included the financial statement schedule listed at Item 14. These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Crown Crafts, Inc. and
subsidiaries as of March 31, 1996 and April 2, 1995, and the results of their
operations and their cash flow for each of the three years in the period ended
March 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
May 24, 1996
F-2
<PAGE> 19
CROWN CRAFTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and April 2, 1995
<TABLE>
<CAPTION>
(dollar amounts in thousands, except par value per share) 1996 1995
- --------------------------------------------------------- --------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 517 $ 567
Accounts receivable (less allowances of $2,033 in 1996 and $1,496 in 1995):
Due from factor 27,943 20,657
Other 12,901 4,382
Inventories 47,269 44,909
Deferred income taxes 1,510 737
Other current assets 3,474 2,152
--------- ---------
Total current assets 93,614 73,404
--------- ---------
PROPERTY, PLANT AND EQUIPMENT - at cost:
Land, buildings and improvements 44,274 32,060
Construction projects in process 666
Machinery and equipment 65,782 54,584
Furniture and fixtures 1,544 1,735
--------- ---------
111,600 89,045
Less accumulated depreciation 34,265 29,583
--------- ---------
Property, plant and equipment - net 77,335 59,462
--------- ---------
OTHER ASSETS:
Goodwill 13,526 54
Other 1,223 1,111
--------- ---------
Total Other Assets 14,749 1,165
--------- ---------
TOTAL $ 185,698 $ 134,031
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 1,180 $ 15,070
Accounts payable 12,480 10,666
Income taxes payable 46 687
Accrued wages and benefits 3,607 2,963
Other accrued liabilities 3,332 2,063
Current maturities of long-term debt 5,100 5,000
--------- ---------
Total current liabilities 25,745 36,449
--------- ---------
NON-CURRENT LIABILITIES:
Long-Term Debt 69,300 5,000
Deferred Income Taxes 6,936 4,933
Other 700 649
--------- ---------
Total non-current liabilities 76,936 10,582
--------- ---------
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common stock - par value $1.00 per share;
50,000,000 shares authorized 9,051 9,004
Additional paid-in capital 34,438 33,811
Retained earnings 54,327 51,352
Common stock held in treasury - at cost (14,799) (7,167)
--------- ---------
Total shareholders' equity 83,017 87,000
--------- ---------
TOTAL $ 185,698 $ 134,031
========= =========
</TABLE>
see notes to consolidated financial statements
F-3
<PAGE> 20
CROWN CRAFTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Fiscal years ended March 31, 1996, April 2, 1995 and April 3, 1994
<TABLE>
<CAPTION>
(in thousands, except per share amounts) 1996 1995 1994
- ---------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Net Sales $ 219,002 $ 210,963 $ 187,335
Cost of products sold 176,550 164,232 149,337
--------- --------- ---------
Gross profit 42,452 46,731 37,998
Marketing and administrative expenses 31,827 27,853 22,624
--------- --------- ---------
Earnings from operations 10,625 18,878 15,374
Other income (expense):
Interest expense (3,807) (1,992) (1,559)
Cotton futures transactions (847) (115) 124
Other - net 568 709 187
--------- --------- ---------
Earnings before income taxes 6,539 17,480 14,126
Provisions for income taxes 2,592 6,430 5,116
--------- --------- ---------
Net earnings $ 3,947 $ 11,050 $ 9,010
========= ========= =========
Earnings per share $ 0.49 $ 1.31 $ 1.08
========= ========= =========
Average shares outstanding 8,125 8,457 8,368
========= ========= =========
</TABLE>
see notes to consolidated financial statements
F-4
<PAGE> 21
CROWN CRAFTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Fiscal years ended March 31, 1996, April 2, 1995 and April 3, 1994
<TABLE>
<CAPTION>
(dollar amounts in thousands)
- -----------------------------
Treasury Stock
Additional --------------------------
Common Paid-In Retained Number
Stock Capital Earnings Of Shares Cost
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances - March 28, 1993 $ 8,712 $ 30,106 $ 33,313 387,697 $ 5,806
Excercise of stock options 124 1,225
Treasury stock acquired in
conjunction with exercise
of stock options 32,428 608
Tax benefit from exercise
of stock options 314
Cash dividends ($0.12 per share) (1,005)
Net earnings 9,010
-------- -------- -------- --------- --------
Balances - April 3, 1994 8,836 31,645 41,318 420,125 6,414
Exercise of stock options 168 1,921
Treasury stock acquired in
conjunction with exercise
of stock options 44,063 753
Tax benefit from exercise
of stock options 245
Cash dividends ($0.12 per share) (1,016)
Net earnings 11,050
-------- -------- -------- --------- --------
Balances - April 2, 1995 9,004 33,811 51,352 464,188 7,167
Exercise of stock options 47 557
Treasury stock acquired in
conjunction with exercise
of stock options 6,047 97
Tax benefit from exercise
of stock options 70
Treasury stock purchases 636,200 7,535
Cash dividends ($0.12 per share) (972)
Net earnings 3,947
-------- -------- -------- --------- --------
BALANCES - MARCH 31, 1996 $ 9,051 $ 34,438 $ 54,327 1,106,435 $ 14,799
======== ======== ======== ========= ========
</TABLE>
number of shares of common stock issued: 9,050,636 at March 31, 1996 and
9,003,991 at April 2, 1995
see notes to consolidated financial statements
F-5
<PAGE> 22
CROWN CRAFTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal years ended March 31, 1996, April 2, 1995 and April 3, 1994
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- -------------------- -------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 3,947 $ 11,050 $ 9,010
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization of
property, plant and equipment 8,885 7,104 5,229
Amortization of goodwill 357 5 2
Deferred income taxes 767 1,245 648
Gain on sale of property,
plant and equipment (10) (234) (474)
Changes in assets and liabilities, net of
effects of acquisitions of businesses:
Accounts receivable (7,792) 998 (6,986)
Inventories 4,756 213 (1,774)
Other current assets (1,171) (407) (120)
Other assets (86) (877) 605
Accounts payable (1,311) (2,770) 1,527
Income taxes payable (1,078) 108 154
Accrued liabilities 27 318 1,790
Other liabilities 51 47 (85)
-------- -------- --------
Net Cash Provided by Operating Activities 7,342 16,800 9,526
-------- -------- --------
INVESTING ACTIVITIES:
Capital expenditures (23,650) (18,898) (11,858)
Acquisitions, net of cash acquired (20,471)
Proceeds from sale of property,
plant and equipment 444 1,465 1,003
-------- -------- --------
Net Cash Used for Investing Activities (43,677) (17,433) (10,855)
-------- -------- --------
FINANCING ACTIVITIES:
Long-term borrowings 50,400
Payment of long-term debt (6,564) (5,000) (2,000)
Increase in bank revolving credit 19,000
Increase (decrease) in notes payable (18,621) 5,210 3,260
Purchases of treasury stock (7,535)
Stock options exercised 577 1,581 1,055
Cash dividends (972) (1,016) (1,005)
-------- -------- --------
Net Cash Provided by Financing Activities 36,285 775 1,310
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (50) 142 (19)
CASH AT BEGINNING OF YEAR 567 425 444
-------- -------- --------
CASH AT END OF YEAR $ 517 $ 567 $ 425
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 3,541 $ 4,831 $ 4,100
======== ======== ========
Interest paid, net of interest capitalized
of $402 (1996), $125 (1995) and $407 (1994) $ 3,172 $ 2,046 $ 1,573
======== ======== ========
</TABLE>
see notes to consolidated financial statements
F-6
<PAGE> 23
CROWN CRAFTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended March 31, 1996, April 2, 1995 and April 3, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying consolidated financial
statements include the accounts of Crown Crafts, Inc. and its subsidiaries
(collectively, the "Company"). All significant intercompany balances and
transactions have been eliminated. Certain amounts appearing in prior financial
statements have been reclassified to conform to the 1996 presentation.
The Company's fiscal year ends on the Sunday nearest March 31. Fiscal
years are designated in the consolidated financial statements and notes thereto
by reference to the calendar year within which the fiscal year ends. The
consolidated financial statements encompass 52 weeks of operations for 1996 and
1995, and 53 weeks of operations for 1994.
The Company operates in a single business segment within the textile
industry and is principally engaged in the design, manufacture and sale of home
furnishings products. Sales are generally made directly to retailers, primarily
department and specialty stores, mass merchants, large chain stores and gift
stores.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
Inventories: Inventories are valued at the lower of cost, determined
on a first-in, first-out basis, or market.
Depreciation and Amortization: Depreciation and amortization of
property, plant and equipment are provided over the estimated useful lives of
the respective assets using principally the straight-line method. Estimated
useful lives are 15 to 40 years for buildings, 4 to 7-1/2 years for machinery
and equipment, and 8 years for furniture and fixtures. The cost of
improvements to leased premises is amortized over the shorter of the estimated
life of the improvement or the term of the lease.
Goodwill represents the unamortized excess of the cost of acquired
enterprises over the fair value of the net identifiable assets at the date of
acquisition. Goodwill is amortized using the straight-line method over 10 to 30
years. The recoverability of goodwill is periodically assessed based on
anticipated profitability of the related acquired entity.
Revenue Recognition: Sales are recorded on the date merchandise is
shipped to customers, and are reported net of returns and allowances in the
consolidated statements of earnings.
Cotton Futures Transactions: Realized and unrealized gains and losses
in the fair values of cotton futures contracts are recognized in earnings
during the periods in which such changes occur. No futures contracts were
outstanding at March 31, 1996.
Provisions for Income Taxes: The provisions for income taxes include
all currently payable federal, state and local taxes which are based upon the
Company's taxable income and the change during the fiscal year in net deferred
income tax assets and liabilities. The Company provides for deferred income
taxes based on the difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates which will be in effect during
the years in which such differences are expected to reverse.
Earnings Per Share: Earnings per share have been computed using the
weighted average number of common shares outstanding for each period presented.
Such computations excluded the effect of outstanding stock options since they
did not have a material dilutive effect.
2. ACQUISITIONS
During the fiscal year that ended March 31, 1996, the Company
completed four acquisitions, all of which were accounted for as purchases.
Accordingly, the consolidated statement of earnings for 1996 includes the
revenues, expenses and operating results for each business commencing with its
respective acquisition date.
On October 31, 1995, the Company acquired all of the outstanding stock
of The Red Calliope and Associates, Inc. for $8.9 million in cash and $5.8
million in short-term notes. The Red Calliope is a leading designer and
marketer of infant bedding products and related accessories. The notes issued
in connection with this transaction were paid prior to March 31, 1996, in
accordance with their terms.
F-7
<PAGE> 24
On April 3, 1995, the Company acquired all of the outstanding stock of
Textile, Inc., a contract manufacturer of jacquard-woven products. On December
19, 1995, the Company acquired all of the outstanding stock of KKH Corporation,
a designer and marketer of imported patented animal-shaped children's pillows
and related products. On January 4, 1996, the Company acquired all of the
outstanding stock of Churchill Weavers, Inc., a manufacturer and marketer of
hand-woven luxury textile products. The total consideration for these three
acquisitions was $6.4 million. Contingent consideration of $0.5 million is
payable if KKH Corporation's separate-company profits exceed certain amounts
through 1999. Any such payments will increase goodwill in the fiscal years
during which the earnings requirements are met.
The net purchase price for these four acquisitions was allocated based
upon the respective acquisition-date fair market values of assets acquired and
liabilities assumed, as follows:
<TABLE>
<S> <C>
(in thousands)
- --------------
Assets acquired, other than cash $ 18,899
Goodwill 13,829
--------
32,728
Less liabilities assumed 12,257
--------
Purchase price, net of cash acquired $ 20,471
========
</TABLE>
Goodwill of $10.2 million was associated with the acquisition of The
Red Calliope and Associates, Inc., and is being amortized over a period of
thirty years. The remaining goodwill arises principally from the acquisition of
Textile, Inc. and is being amortized primarily over fifteen years.
The following unaudited pro forma information presents the Company's
consolidated results of operations as though the acquisition of The Red
Calliope and Associates, Inc. had occurred on the first day of fiscal 1995.
These pro forma results do not purport to be indicative of the results which
would have been achieved had the acquisition been made on that date, or of
future results of operations. The pro forma information does not include the
other three acquired companies, since their inclusion would not materially
alter the information shown therein or the Company's reported consolidated
results of operations.
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- -------------- --------- ---------
<S> <C> <C>
Net sales $ 238,510 $ 236,868
Net earnings 4,070 10,779
Earnings per share 0.50 1.27
</TABLE>
3. INVENTORIES
Major classes of inventory were as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- -------------- -------- --------
<S> <C> <C>
Raw materials and supplies $ 23,076 $ 24,846
Work in process 2,916 2,831
Finished goods 21,277 17,232
-------- --------
$ 47,269 $ 44,909
======== ========
</TABLE>
4. FINANCING ARRANGEMENTS
Factoring Agreement: The Company assigns the majority of its trade
accounts receivable to a commercial factor. The Company does not borrow funds
from its factor or take advances against receivables so assigned. Under the
terms of the factoring agreement, the factor remits payments to the Company on
the approximate due dates of the assigned invoices. The factor bears credit
losses with respect to assigned receivables which are within approved credit
lines. The Company bears losses resulting from returns, allowances, claims and
discounts. Factoring fees, which are included in marketing and administrative
expenses in the consolidated statements of earnings, were: $ 1,477,000 (1996),
$1,702,000(1995) and $1,501,000 (1994).
Notes Payable: At March 31, 1996, the Company had uncommitted lines of
credit totaling $40,000,000 with two banks at floating rates of interest which
generally do not exceed the banks' respective prime lending rates. No fees or
compensating balances are required under these arrangements, and the lines are
cancelable at the banks' discretion. Annual average borrowings and weighted
average interest rates under these arrangements were $18,291,000 at 6.4% in
1996 and $17,720,000 at 5.6% in 1995. The weighted average interest rates on
borrowings outstanding under these arrangements at March 31, 1996 and April 2,
1995, were 6.0% and 6.7%, respectively.
F-8
<PAGE> 25
4. FINANCING ARRANGEMENTS (continued)
Long-Term Debt: At March 31, 1996 and April 2, 1995, long-term debt
consisted of:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- -------------- -------- --------
<S> <C> <C>
Private placements:
6.56% to 7.27% unsecured
notes (6.92% weighted
average) due in annual
installments of $7,143 from
October 1999 through
October 2005 $ 50,000
9.22% unsecured note due in
semiannual installments of
$2,500 through November 1996 5,000 $ 10,000
Floating rate bank revolving
credit facilities maturing
August 1998 19,000
Other 400
-------- --------
74,400 10,000
Less current maturities 5,100 5,000
-------- --------
$ 69,300 $ 5,000
======== ========
</TABLE>
During the second quarter of fiscal 1996, the Company entered into
unsecured revolving credit agreements totaling $30 million with two banks. The
interest rate on borrowings under these lines is based on the London Interbank
Offered Rate (LIBOR). At March 31, 1996, the weighted average interest rate on
amounts outstanding under these facilities was 5.9%. The Company pays facility
fees on the unused portions of the committed credit lines.
The unsecured notes, which are placed with an insurance company, and
the bank revolving credit facilities contain similar restrictive covenants
requiring the Company to maintain certain ratios of earnings to fixed charges
and of total debt to total capitalization. In addition, the bank revolving
credit facilities contain certain covenants requiring the Company to maintain
minimum levels of shareholders' equity and certain ratios of total debt to
cash flow. The bank facilities also place restrictions on the amounts the
Company may expend on acquisitions and purchases of treasury stock. At March
31, 1996, the Company was in compliance with all restrictive covenants, and
retained earnings of approximately $8.6 million were available for dividend
payments.
Scheduled maturities of long-term debt in each of the next five
fiscal years are: $5,100,000 in 1997, $100,000 in 1998, $19,100,000 in 1999,
$7,243,000 in 2000 and $7,143,000 in 2001. The fair value at March 31, 1996 of
the Company's long-term obligations, which amount has been estimated by
discounting the projected cash flows using rates currently available to the
Company for loans with similar terms and maturities, approximates their
carrying value.
5. INCOME TAXES
The provisions for income taxes are summarized as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- -------------- ------- ------- -------
<S> <C> <C> <C>
Current:
Federal $ 1,645 $ 4,869 $ 4,196
State and local 180 316 272
------- ------- -------
Total current 1,825 5,185 4,468
------- ------- -------
Deferred:
Federal 824 1,082 610
State and local (57) 163 38
------- ------- -------
Total deferred 767 1,245 648
------- ------- -------
$ 2,592 $ 6,430 $ 5,116
======= ======= =======
</TABLE>
The tax effects of temporary differences which comprise the deferred
tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995
- -------------- ------- -------
<S> <C> <C>
Gross deferred income tax
liabilities:
Property, plant and equipment $ 6,280 $ 4,513
DISC earnings deferral 907 690
Other 395 502
------- -------
Total gross deferred income
tax liabilities 7,582 5,705
------- -------
Gross deferred income tax assets:
Employee benefit accruals 1,277 1,000
Accounts receivable reserves 537 290
Other 342 219
------- -------
Total gross deferred income tax assets 2,156 1,509
------- -------
Net deferred income tax liability $ 5,426 $ 4,196
======= =======
</TABLE>
F-9
<PAGE> 26
A reconciliation between the provisions for income taxes computed by
applying the applicable maximum federal statutory rates to earnings before
income taxes and the provisions for income taxes is as follows:
<TABLE>
<CAPTION>
(in thousands) 1996 1995 1994
- -------------- ------- ------- -------
<S> <C> <C> <C>
Income taxes at federal statutory rates $ 2,289 $ 6,118 $ 4,944
Non-deductible amortization of goodwill 125 2 1
State income taxes net of federal income
tax benefit 80 311 202
Other 98 (1) (31)
------- ------- -------
Provisions for income taxes $ 2,592 $ 6,430 $ 5,116
======= ======= =======
</TABLE>
6. RETIREMENT PLANS
The Company maintains an Employee Stock Ownership Plan, which provides
for annual contributions by the Company at the discretion of the Board of
Directors for the benefit of eligible employees. Contributions can be made
either in cash or in shares of the Company's common stock. Participation in the
Plan is open to all Company employees who are at least twenty-one years of age
and who have been employed by the Company for at least one year. The Company
recognized expense of $600,000, $750,000 and $650,000 for its cash
contributions to the Plan in 1996, 1995 and 1994, respectively.
Effective January 1, 1996, the Company established an Employee Savings
Plan under Section 401(k) of the Internal Revenue Code. The plan covers
substantially all employees. Under the Plan, employees generally may elect to
exclude up to 15% of their compensation from amounts subject to income tax as a
salary deferral contribution. The Board of Directors determines each calendar
year the portion, if any, of employee contributions which will be matched by
the Company. For calendar 1996, the Company will make a matching contribution
to each employee in an amount equal to the first 2% of such contributions. The
Company's matching contributions to the Plan were approximately $118,000 for
fiscal 1996 during the three months of that fiscal year in which this Plan was
in effect.
7. STOCK OPTIONS
The Company's 1976 and 1995 Stock Option Plans provide for the grant
of non-qualified stock options to officers and key employees at prices no less
than the price of the stock on the date of each grant. In addition, the 1995
Stock Option Plan provides for the grant of incentive stock options to
employees and a fixed annual grant of 2,000 non-qualified stock options to
each non-employee director on the day after each year's annual meeting of
shareholders. Through March 31, 1996, non-qualified options covering a total
of 6,000 shares have been issued to non-employee directors and no incentive
options have been issued. One-third of the non-qualified options become
exercisable on each of the first three anniversaries of their issuance. The
non-qualified options expire on the fifth anniversary of their issuance.
A total of 5,225,000 shares of common stock have been
authorized for issuance under the Plans. At March 31, 1996, 1,228,101 options
were reserved for future issuance. The options outstanding at March 31, 1996
expire through March 2001, have an average exercise price of $13.97, and
include 779,840 options exercisable at March 31, 1996.
The following table summarizes stock option activity during each of
the most recent three fiscal years:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Options outstanding,
beginning of year 1,385,207 1,086,906 690,198
Options granted 515,209 536,250 549,500
Options canceled (109,629) (70,339) (28,003)
Options exercised (46,645) (167,610) (124,789)
--------- --------- ---------
Options outstanding,
end of year 1,744,142 1,385,207 1,086,906
--------- --------- ---------
Price range of options
granted:
High $ 17.50 $ 20.63 $ 19.75
Low 9.50 14.63 13.25
Price range of options
exercised:
High $ 15.75 $ 15.25 $ 16.88
Low 10.63 10.63 6.14
Average price of options
exercised $ 12.94 $ 12.46 $ 10.81
Price range of options
outstanding at end of year:
High $ 20.63 $ 20.63 $ 19.75
Low 9.50 10.63 10.63
</TABLE>
F-10
<PAGE> 27
7. STOCK OPTIONS (continued)
Optionees may pay the option price of options exercised by
surrendering to the Company shares of the Company's stock that the optionee has
owned for at least six months prior to the date of such exercise. Further,
optionees may satisfy their required income tax withholding obligations upon
the exercise of options by requesting the Company to withhold the number of
otherwise issuable shares with a market value equal to such tax withholding
obligation.
On March 29, 1996, the Compensation Committee of the Company's Board
of Directors authorized the Company to issue new options on April 12, 1996, in
exchange for stock options which had been issued after December 31, 1991, were
held by active employees who elected to participate in the exchange, and for
which the closing market price on April 12, 1996 was at least $0.25 below the
option exercise price. The number of options so issued would be equal to 80% of
any option exchanged which had originally been issued in calendar 1992 and 100%
of options exchanged which had originally been issued after December 31, 1992.
Under this program, options covering a total of 1,613,474 shares at an average
option price of $14.14 were canceled and options for 1,569,936 shares were
issued at an exercise price of $10.25 per share, or $0.25 in excess of the
closing market price of the Company's stock on April 12, 1996. The replacement
options will vest and expire on the same basis as any other options issued by
the Company.
8. MAJOR CUSTOMERS
The Company's sales to Wal-Mart Stores, Inc. constituted 18.2%, 17.3%
and 16.1% of net sales, respectively, in 1996, 1995 and 1994. The Company's
sales to JC Penney Company constituted 11.8% of net sales in 1994.
9. COMMITMENTS
Lease Commitments: At March 31, 1996, the Company's minimum annual
rentals under noncancelable operating leases, principally for manufacturing,
warehousing and office facilities, were as follows:
<TABLE>
<S> <C>
(in thousands)
- --------------
1997 $ 2,400
1998 1,999
1999 1,592
2000 1,319
2001 1,111
Thereafter 965
-------
$ 9,386
=======
</TABLE>
Total rent expense was $2,990,000, $2,486,000 and $1,620,000 for 1996,
1995 and 1994, respectively.
Letters of Credit: At March 31, 1996, the Company had outstanding
letters of credit, primarily for purchases of inventory, aggregating $4.4
million.
F-11
<PAGE> 28
CROWN CRAFTS, INC. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
Selected Quarterly Financial Information
<TABLE>
<CAPTION>
First Second Third Fourth
UNAUDITED ($ in thousands, except per share amounts) Quarter Quarter Quarter Quarter
------------------------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED MARCH 31, 1996
Net sales $ 39,207 $ 57,330 $ 62,209 $ 60,256
Gross profit 7,551 12,243 13,288 9,370
Net earnings 456 2,118 2,095 (722)
Net earnings per share 0.05 0.26 0.26 (0.09)
FISCAL YEAR ENDED APRIL 2, 1995
Net sales $ 39,713 $ 55,945 $ 59,702 $ 55,603
Gross profit 7,700 12,668 14,501 11,862
Net earnings 1,243 3,122 4,165 2,520
Net earnings per share 0.15 0.37 0.49 0.30
</TABLE>
F-12
<PAGE> 29
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has neither changed its independent accountants nor had any
disagreements on accounting or financial disclosure with such accountants.
PART III
The Company's Proxy Statement to be filed in connection with its Annual
Meeting of Shareholders on August 8, 1996 is hereby incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(A)1. FINANCIAL STATEMENTS
The following consolidated financial statements of Registrant are filed
with this report and included in Part II, Item 8:
Page
Report of Independent Auditors.................... F-2
Consolidated Balance Sheets as of
March 31, 1996 and April 2, 1995................ F-3
Consolidated Statements of Earnings
for the Three Fiscal Years in the
Period Ended March 31, 1996..................... F-4
Consolidated Statements of Changes in
Shareholders' Equity for the Three Fiscal
Years in the Period Ended March 31, 1996........ F-5
Consolidated Statements of Cash Flows
for the Three Fiscal Years in the
Period Ended March 31, 1996..................... F-6
Notes to Consolidated Financial
Statements...................................... F-7
16
<PAGE> 30
(A)2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule of Registrant is filed with
this report:
Page
Schedule VIII- Valuation and Qualifying Accounts......... 18
All other schedules not listed above have been omitted because they are
not applicable or the required information is included in the financial
statements or notes thereto.
17
<PAGE> 31
CROWN CRAFTS, INC. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
Schedule VIII-Valuation and Qualifying Accounts
($ in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
---------- ---------- ---------- ----------
Additions
Balance at Charged To Balance at
Beginning Costs and End of
of Period Expenses Deductions * Period
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Accounts Receivable Valuation Accounts:
Year Ended April 3, 1994
Reserve for doubtful accounts $ 199 $ 124 $ 30 $ 293
Reserve for customer deductions 401 457 858
Year Ended April 2, 1995
Reserve for doubtful accounts $ 293 $ 55 $ 318 $ 30
Reserve for customer deductions 858 135 723
Year Ended March 31, 1996
Reserve for doubtful accounts $ 30 $ 67 $ 18 $ 79
Reserve for customer deductions 723 453 1,176
</TABLE>
* Deductions from the reserve for doubtful accounts represent the amount of
accounts written off reduced by any subsequent recoveries.
18
<PAGE> 32
(A)3. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
The following Executive Compensation Plans and Arrangements are filed with
this Form 10-K or have been previously filed as indicated below:
1. Crown Crafts, Inc. 1976 Non-Qualified Stock Option Plan. (6)(Exhibit
10(b)(i))
2. Philip Bernstein Death Benefits Agreement dated March 30, 1992 (5)
(Exhibit 10(b)(ii))
3. Description of Crown Crafts, Inc. Executive Incentive Bonus Plan (5)
(Exhibit 10(b)(iii))
4. Crown Crafts, Inc. 1995 Stock Option Plan (1) (Exhibit 10(b)(iv))
5. Form of Nonstatutory Stock Option Agreement (pursuant to 1995
Stock Option Plan) (1) (Exhibit 10(b)(v))
6. Form of Nonstatutory Stock Option Agreement for Nonemployee
Directors (pursuant to 1995 Stock Option Plan) (1) (Exhibit
10(b)(vi))
(A)5. EXHIBITS
Exhibits required to be filed by Item 601 of Regulation S-K are included
as Exhibits to this report as follows:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
2(a) Merger Agreement dated as of October 8, 1995 between and among
Registrant and CC Acquisition Corp, and Neal Fohrman and
Stanley Glickman and The Red Calliope and Associates, Inc. (7)
3(a) Restated Articles of Incorporation of
Registrant. (1)
3(b) Bylaws of Registrant. (1)
4(a) Instruments defining the rights of security holders are
contained in the Restated Articles of Incorporation of
Registrant, and Article I of the Restated Bylaws of
Registrant. (1)
</TABLE>
19
<PAGE> 33
<TABLE>
<S> <C>
4(b) Form of Rights Agreement dated as of August 11, 1995 between the
Registrant and Trust Company Bank, including Form of Right
Certificate and Summary of Rights to Purchase Common Shares. (2)
10(a)(i) 9.22% Note Agreement with The Prudential Insurance Company of America.
(3)
10(a)(ii) Letter Agreement with The Prudential Insurance Company of America
dated July 23, 1991. (4)
10(a)(iii) Letter Agreement with The Prudential Insurance Company of America
dated April 9, 1992. (4)
10(a)(iv) Letter Agreement with The Prudential Insurance Company of America
dated May 21, 1993. (5)
10(a)(v) Letter Agreement with The Prudential Insurance Company of America
dated July 14, 1994 (8)
10(a)(vi) Letter Agreement with The Prudential Insurance Company of America
dated July 29, 1994 (8)
10(a)(vii) Letter Agreement with The Prudential Insurance Company of America
dated March 31, 1995 (8)
10(a)(viii) Letter Agreement with The Prudential Insurance Company of America
dated October 12, 1995 (1)
10(b)(i) Crown Crafts, Inc. Non-Qualified Stock Option Plan. (6)
10(b)(ii) Philip Bernstein Death Benefits Agreement dated March 30, 1992.
(5)
10(b)(iii) Description of Crown Crafts, Inc. Executive Incentive Bonus Plan.
(5)
10(b)(iv) Crown Crafts, Inc. 1995 Stock Option Plan (1)
10(b)(v) Form of Nonstatutory Stock Option Agreement (pursuant to 1995
Stock Option Plan) (1)
10(b)(vi) Form of Nonstatutory Stock Option Agreement for Nonemployee
Directors (pursuant to 1995 Stock Option Plan) (1)
10(c)(i) Revolving Credit Agreement dated August 25, 1995 with NationsBank,
National Association (Carolinas) (1)
</TABLE>
20
<PAGE> 34
<TABLE>
<S> <C>
10(c)(ii) Amendment No. 1 to Revolving Credit Agreement dated May 1, 1996 with
NationsBank, National Association (Carolinas)
10(d)(i) Revolving Credit Agreement dated August 25, 1995 with Wachovia Bank of
Georgia, N.A. (1)
10(d)(ii) Amendment No. 1 to Revolving Credit Agreement dated May 1, 1996 with
Wachovia Bank of Georgia, N.A.
10(e)(i) Note Purchase and Private Shelf Facility dated October 12, 1995 with
The Prudential Insurance Company of America (1)
10(e)(ii) Letter Agreement dated April 4, 1996 with The Prudential Insurance
Company of America
21 Subsidiaries of the Registrant
23 Consent of Deloitte & Touche LLP
27 Financial Data Schedule (for SEC use only)
</TABLE>
There were no reports on Form 8-K during the quarter ended March 31,
1996.
- ----------------------
(1) Incorporated herein by reference to exhibit of same number to
Registrant's Quarterly Report on Form 10-Q for the quarter ended October 1,
1995.
(2) Incorporated herein by reference to exhibit of same number to
Registrant's Report on Current Form 8-K dated August 22, 1995.
(3) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended March 31,
1991.
(4) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended March 29,
1992.
(5) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended March 28,
1993.
21
<PAGE> 35
(6) Incorporated herein by reference to exhibit of same number to
Registrant's Registration Statement on Form S-8, filed April 8, 1994. (Reg.
No. 33-77558).
(7) Incorporated herein by reference to exhibit of same number to
Registrants Report on Current Form 8-K dated November 13, 1995.
(8) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended April 2,
1995.
22
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CROWN CRAFTS, INC.
BY:/s/ MICHAEL H. BERNSTEIN
---------------------------
Michael H. Bernstein
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/MICHAEL H. BERNSTEIN President and Chief June 27, 1996
- ----------------------- Executive Officer,
Michael H. Bernstein Director
/s/PHILIP BERNSTEIN Chairman of the Board June 27, 1996
- -----------------------
Philip Bernstein
/s/E. RANDALL CHESTNUT Director June 27, 1996
- -----------------------
E. Randall Chestnut
/s/ROGER D. CHITTUM Director June 27, 1996
- -----------------------
Roger D. Chittum
/s/PAUL A.CRISCILLIS,JR. Director and Chief June 27, 1996
- ----------------------- Financial Officer
Paul A. Criscillis, Jr.
/s/PATRICIA G. KNOLL Director June 27, 1996
- -----------------------
Patricia G. Knoll
/s/RUDOLPH J. SCHMATZ Director June 27, 1996
- -----------------------
Rudolph J. Schmatz
/s/JANE E. SHIVERS Director June 27, 1996
- -----------------------
Jane E. Shivers
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C>
/s/ALFRED M. SWIREN Director June 27, 1996
- -----------------------
Alfred M. Swiren
/s/RICHARD N. TOUB Director June 27, 1996
- -----------------------
Richard N. Toub
/s/ROBERT E. SCHNELLE Chief Accounting Officer, June 27, 1996
- ----------------------- Treasurer
Robert E. Schnelle
</TABLE>
<PAGE> 1
EXHIBIT 10(c)(ii)
AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT (this "Agreement") is
made and entered into as of this 1st day of May, 1996 among CROWN CRAFTS, INC.,
a Georgia corporation ("Borrower"), NATIONSBANK, N.A., a national banking
association formerly known as NationsBank, National Association (Carolinas)
(the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender have entered into a Revolving Credit
Agreement dated as of August 25, 1995, as hereby amended (the "Credit
Agreement"), pursuant to which the Lender has made available to the Borrower a
revolving credit facility of up to $15,000,000; and
WHEREAS, the Borrower has requested that the Credit Agreement be amended
in the manner set forth herein and the Lender is willing to agree to such
amendment;
NOW, THEREFORE, in consideration of the mutual covenants and the
fulfillment of the conditions set forth herein, the parties hereto do hereby
agree as follows:
1. Definitions. Any capitalized terms used herein without definition
shall have the meaning set forth in the Credit Agreement.
2. Amendment. Subject to the terms and conditions set forth herein, the
Credit Agreement is hereby amended as follows:
(a) The definitions of "Consolidated Leverage Ratio" is deleted in
its entirety.
(b) Section 1.1 of the Credit Agreement is hereby amended by adding
thereto in alphabetical order the following defined terms:
"Clean-Down Period" shall mean a period of ninety consecutive
days, chosen by the Borrower, during each fiscal year of the
Borrower.
"Consolidated Indebtedness" shall mean, at any time,
Indebtedness of the Borrower and its Subsidiaries consolidated in
accordance with Generally Accepted Accounting Principles.
"Priority Debt" shall mean, at any time, the sum (without
duplication) of (i) all Indebtedness of Subsidiaries, plus (ii) all
Indebtedness of the Borrower secured by Liens plus (iii) all
preferred stock of any Subsidiary owned by any Person other than the
Borrower or a wholly-owned Subsidiary.
<PAGE> 2
"Total Capitalization" shall mean, at any time, the sum of (i)
Consolidated Shareholders' Equity plus (ii) Consolidated
Indebtedness at such time.
(c) Section 7.1 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
7.1 Consolidated Indebtedness. Permit (i) Consolidated
Indebtedness to exceed 65% of Total Capitalization at any time other
than during a Clean-Down Period; (ii) Consolidated Indebtedness to
exceed 60% of Total Capitalization during any Clean-Down Period; or
(iii) Priority Debt to exceed 10% of Total Capitalization during any
four month period following any Acquisition permitted hereunder in
which Indebtedness, which after giving effect to such transaction
would constitute Priority Debt, is assumed by the Borrower or any
Subsidiary and, at all other times, Priority Debt to exceed 5% of
Total Capitalization.
(d) Section 7.2 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
(i) Consolidated Fixed Charage Coverage Ratio.
Permit at the end of each fiscal quarter set forth below the
Consolidated Fixed Charge Ratio of the Borrower to be less than the
ratio indicated for each such fiscal quarter:
Fiscal Quarter Ended
--------------------
March 31, 1996 1.50 to 1.00
June 30, 1996 1.30 to 1.00
September 29, 1996 1.20 to 1.00
December 29, 1996 1.30 to 1.00
March 30, 1997
and each fiscal
quarter thereafter 2.00 to 1.00
(e) Section 7.4 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
(i) Consolidated Cash Flow Ratio.
Permit at the end of each fiscal quarter set
forth below the ratio of Consolidated Funded
Indebtedness to Consolidated Cash Flow for the
Four-Quarter Period then ended to be greater than the
ratio indicated for each such fiscal quarter:
2
<PAGE> 3
Fiscal Quarter Ended
--------------------
March 31, 1996 7.00 to 1.00
June 30, 1996 8.00 to 1.00
September 29, 1996 9.00 to 1.00
December 29, 1996 8.00 to 1.00
March 30, 1997
and each fiscal
quarter thereafter 6.00 to 1.00
(f) Section 7.5 of the Credit Agreement is hereby amended by (i)
deleting the word "and" at the end of clause (e) thereof, (ii) deleting
the period at the end of clause (f) thereof and inserting a semi-colon in
its place and (iii) adding a new clause (g) thereto which shall read as
follows:
(g) Liens securing Priority Debt incurred in connection
with an Acquisition permitted hereunder provided such Liens
exist at the time of such Acquisition and were not created in
contemplation of such Acquisition.
3. Representations and Warranties. In order to induce the Lender to enter
into this Agreement, the Borrower represents and warrants to the Lender as
follows:
(a) The representations and warranties made by Borrower in Article V
of the Credit Agreement are true and correct on and as of the date hereof,
except to the extent that such representations and warranties expressly
relate to an earlier date and except that the financial statements
referred to in Section 5.6(a) of the Credit Agreement shall be deemed to
be those financial statements most recently delivered to the Lender
pursuant to Section 6.1 of the Credit Agreement;
(b) There has been no material adverse change in the condition,
financial or otherwise, of the Borrower and its Subsidiaries, taken as a
whole, since the date of the most recent financial reports of the Borrower
received by the Lender under Section 6.1(a) of the Credit Agreement, other
than changes in the ordinary course of business;
(c) The business and properties of the Borrower and its
Subsidiaries, taken as a whole, are not, and since the date of the most
recent financial report of the Borrower and its Subsidiaries received by
the Lender under Section 6.1(a) of the Credit Agreement, have not been,
adversely affected in any substantial way as the result of any fire,
explosion, earthquake, accident, strike, lockout, combination of workers,
3
<PAGE> 4
flood, embargo, riot, activities of armed forces, war or acts of God or
the public enemy, or cancellation or loss of any major contracts; and
(d) No event has occurred and is continuing which constitutes, and
no condition exists which upon the consummation of the transaction
contemplated hereby would constitute, a Default or an Event of Default on
the part of the Borrower under the Credit Agreement, either immediately or
with the lapse of time or the giving of notice, or both.
4. Entire Agreement. This Agreement sets forth the entire understanding
and agreement of the parties hereto in relation to the subject matter hereof and
supersedes any prior negotiations and agreements among the parties relative to
such subject matter.
5. Full Force and Effect of Agreement. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.
7. Governing Law. This Agreement shall in all respects be governed by the
laws and judicial decisions of the State of Georgia.
8. Enforceability. Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable as to one or more of the
parties hereto, all other provisions nevertheless shall remain effective and
binding on the parties hereto.
9. Credit Agreement. All references in any of the Loan Documents to the
Credit Agreement shall mean the Credit Agreement as amended hereby.
[Signature page follows.]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
BORROWER:
CROWN CRAFTS, INC.
By: /s/ Robert E. Schnelle
-------------------------------
Name: Robert E. Schnelle
-----------------------------
Title: Treasurer
----------------------------
LENDER:
NATIONSBANK, N.A.
By: /s/ Nitesh A. Lala
-------------------------------
Name: Nitesh A. Lala
-----------------------------
Title: VP
----------------------------
[Signature Page 1 of 1]
<PAGE> 1
EXHIBIT 10(d)(ii)
AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT (this "Agreement") is
made and entered into as of this 1st day of May, 1996 among CROWN CRAFTS, INC.,
a Georgia corporation ("Borrower"), WACHOVIA BANK OF GEORGIA, N.A., a national
banking association organized under the laws of the United States (the
"Lender").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender have entered into a Revolving Credit
Agreement dated as of August 25, 1995, as hereby amended (the "Credit
Agreement"), pursuant to which the Lender has made available to the Borrower a
revolving credit facility of up to $15,000,000; and
WHEREAS, the Borrower has requested that the Credit Agreement be amended
in the manner set forth herein and the Lender is willing to agree to such
amendment;
NOW, THEREFORE, in consideration of the mutual covenants and the
fulfillment of the conditions set forth herein, the parties hereto do hereby
agree as follows:
1. Definitions. Any capitalized terms used herein without definition
shall have the meaning set forth in the Credit Agreement.
2. Amendment. Subject to the terms and conditions set forth herein, the
Credit Agreement is hereby amended as follows:
(A) The definitions of "Consolidated Leverage Ratio" is deleted in its
entirety.
(B) Section 1.1 of the Credit Agreement is hereby amended by adding
thereto in alphabetical order the following defined terms:
"Clean-Down Period" shall mean a period of ninety consecutive
days, chosen by the Borrower, during each fiscal year of the
Borrower.
"Consolidated Indebtedness" shall mean, at any time,
Indebtedness of the Borrower and its Subsidiaries consolidated in
accordance with Generally Accepted Accounting Principles.
"Priority Debt" shall mean, at any time, the sum (without
duplication) of (i) all Indebtedness of Subsidiaries, plus (ii) all
Indebtedness of the Borrower secured by Liens plus (iii) all
preferred stock of any Subsidiary owned by any Person other than the
Borrower or a wholly-owned Subsidiary.
<PAGE> 2
"Total Capitalization" shall mean, at any time, the sum of (i)
Consolidated Shareholders' Equity plus (ii) Consolidated
Indebtedness at such time.
(c) Section 7.1 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
7.1 Consolidated Indebtedness. Permit (i) Consolidated
Indebtedness to exceed 65% of Total Capitalization at any time other
than during a Clean-Down Period; (ii) Consolidated Indebtedness to
exceed 60% of Total Capitalization during any Clean-Down Period; or
(iii) Priority Debt to exceed 10% of Total Capitalization during any
four month period following any Acquisition permitted hereunder in
which Indebtedness, which after giving effect to such transaction
would constitute Priority Debt, is assumed by the Borrower or any
Subsidiary and, at all other times, Priority Debt to exceed 5% of
Total Capitalization.
(d) Section 7.2 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
(i) Consolidated Fixed Charge Coverage Ratio.
Permit at the end of each fiscal quarter set forth below the
Consolidated Fixed Charge Ratio of the Borrower to be less than the
ratio indicated for each such fiscal quarter:
Fiscal Quarter Ended
--------------------
March 31, 1996 1.50 to 1.00
June 30, 1996 1.30 to 1.00
September 29, 1996 1.20 to 1.00
December 29, 1996 1.30 to 1.00
March 30, 1997
and each fiscal
quarter thereafter 2.00 to 1.00
(e) Section 7.4 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
(i) Consolidated Cash Flow Ratio.
Permit at the end of each fiscal quarter set
forth below the ratio of Consolidated Funded
Indebtedness to Consolidated Cash Flow for the
Four-Quarter Period then ended to be greater than the
ratio indicated for each such fiscal quarter:
2
<PAGE> 3
Fiscal Quarter Ended
--------------------
March 31, 1996 7.00 to 1.00
June 30, 1996 8.00 to 1.00
September 29, 1996 9.00 to 1.00
December 29, 1996 8.00 to 1.00
March 30, 1997
and each fiscal
quarter thereafter 6.00 to 1.00
(f) Section 7.5 of the Credit Agreement is hereby amended by (i)
deleting the word "and" at the end of clause (e) thereof, (ii) deleting
the period at the end of clause (f) thereof and inserting a semi-colon in
its place and (iii) adding a new clause (g) thereto which shall read as
follows:
(g) Liens securing Priority Debt incurred in connection
with an Acquisition permitted hereunder provided such Liens
exist at the time of such Acquisition and were not created in
contemplation of such Acquisition.
3. Representations and Warranties. In order to induce the Lender to enter
into this Agreement, the Borrower represents and warrants to the Lender as
follows:
(a) The representations and warranties made by Borrower in Article V
of the Credit Agreement are true and correct on and as of the date hereof,
except to the extent that such representations and warranties expressly
relate to an earlier date and except that the financial statements
referred to in Section 5.6(a) of the Credit Agreement shall be deemed to
be those financial statements most recently delivered to the Lender
pursuant to Section 6.1 of the Credit Agreement;
(b) There has been no material adverse change in the condition,
financial or otherwise, of the Borrower and its Subsidiaries, taken as a
whole, since the date of the most recent financial reports of the Borrower
received by the Lender under Section 6.1(a) of the Credit Agreement, other
than changes in the ordinary course of business;
(c) The business and properties of the Borrower and its
Subsidiaries, taken as a whole, are not, and since the date of the most
recent financial report of the Borrower and its Subsidiaries received by
the Lender under Section 6.1(a) of the Credit Agreement, have not been,
adversely affected in any substantial way as the result of any fire,
explosion, earthquake, accident, strike, lockout, combination of workers,
3
<PAGE> 4
flood, embargo, riot, activities of armed forces, war or acts of God or
the public enemy, or cancellation or loss of any major contracts; and
(d) No event has occurred and is continuing which constitutes, and
no condition exists which upon the consummation of the transaction
contemplated hereby would constitute, a Default or an Event of Default on
the part of the Borrower under the Credit Agreement, either immediately or
with the lapse of time or the giving of notice, or both.
4. Entire Agreement. This Agreement sets forth the entire understanding
and agreement of the parties hereto in relation to the subject matter hereof and
supersedes any prior negotiations and agreements among the parties relative to
such subject matter.
5. Full Force and Effect of Agreement. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.
7. Governing Law. This Agreement shall in all respects be governed by the
laws and judicial decisions of the State of Georgia.
8. Enforceability. Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable as to one or more of the
parties hereto, all other provisions nevertheless shall remain effective and
binding on the parties hereto.
9. Credit Agreement. All references in any of the Loan Documents to the
Credit Agreement shall mean the Credit Agreement as amended hereby.
[Signature page follows.]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
BORROWER:
CROWN CRAFTS, INC.
By: /s/ Robert E. Schnelle
-------------------------------
Name: Robert E. Schnelle
-----------------------------
Title: Treasurer
--------------------------
LENDER:
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ Susan E. Cates
-------------------------------
Name: Susan E. Cates
-----------------------------
Title: Assistant Vice President
----------------------------
[Signature Page 1 of 1]
<PAGE> 1
EXHIBIT 10(e)(ii)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
c/o Prudential Capital Group
One Gateway Center, 11th Floor
7-45 Raymond Boulevard West
Newark, New Jersey 07102-5312
April 4, 1996
Crown Crafts, Inc.
1600 Riveredge Parkway
Suite 200
Atlanta, GA 30328
Attention: Paul A. Criscillis, Jr.,
Vice President
Ladies and Gentlemen:
Reference is made to that certain Note Agreement dated as of October
12, 1995 (the "Note Agreement"), between Crown Crafts, Inc. (the "Company") and
The Prudential Insurance Company of America ("Prudential"). Terms not
otherwise defined herein are used herein with the respective definition given
them in the Note Agreement.
Pursuant to paragraph 11C of the Note Agreement and as holder of all of
the Notes, Prudential hereby agrees with the Company as follows:
1. Section 6A(iv) of the Note Agreement is hereby amended and
restated in its entirety as follows:
"(iv) Consolidated EBIT to be less than the following
percentages of Fixed Charges as of the dates
shown:
DATE PERCENTAGE
---- ----------
3/31/96 150%
6/30/96 130%
9/30/96 120%
12/31/96 130%
3/31/97 & thereafter 175%
2. Prudential further agrees that the December 18, 1990 note
agreement by and between Prudential and the Company is hereby amended to the
same extent as the Note Agreement is amended in paragraph 1 above.
<PAGE> 2
Crown Crafts, Inc.
April 4, 1996
Page 2
3. Except to the extent amended by the provisions hereof, all of
the terms, conditions and obligations of the Note Agreement shall remain in
full force and effect.
If you agree to the foregoing, please sign each copy of this letter
enclosed and return two of them to Prudential, at which time this letter shall
become a binding agreement between us as of the date first above written.
Very truly yours,
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Robert R. Derrick
---------------------------
Name: Robert R. Derrick
Title: Senior Vice President
Agreed to and accepted
as of April 12, 1996
CROWN CRAFTS, INC.
By:/s/ Paul A. Criscillis, Jr.
---------------------------
Name: Paul A. Criscillis, Jr.
Title: Vice President, Chief Financial Officer
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Churchill Weavers, Inc., a Kentucky corporation
Crown Crafts Home Furnishings, Inc., a New York corporation
Crown Crafts Home Furnishings of Illinois, Inc., a Delaware corporation
Crown Crafts Home Furnishings of California, Inc., a California
corporation
Crown Crafts International, Inc., a Georgia corporation
G.W. Stores, Inc., a North Carolina corporation
Hans Benjamin Furniture, Inc., a South Carolina corporation
KKH Corporation, a California corporation
Textile, Inc., a North Carolina corporation
The Red Calliope and Associate, Inc., a California corporation
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration Statement of
Crown Crafts, Inc. and subsidiaries on Form S-8 of our report dated May 24,
1996, appearing in the Annual Report on Form 10-K of Crown Crafts, Inc. and
subsidiaries for the year ended March 31, 1996.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
June 20, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CROWN CRAFTS FOR THE YEAR ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-03-1995
<PERIOD-END> MAR-31-1996
<CASH> 517
<SECURITIES> 0
<RECEIVABLES> 40,844
<ALLOWANCES> 0
<INVENTORY> 47,269
<CURRENT-ASSETS> 93,614
<PP&E> 111,600
<DEPRECIATION> 34,265
<TOTAL-ASSETS> 185,698
<CURRENT-LIABILITIES> 25,745
<BONDS> 69,300
0
0
<COMMON> 9,051
<OTHER-SE> 73,966
<TOTAL-LIABILITY-AND-EQUITY> 185,698
<SALES> 219,002
<TOTAL-REVENUES> 219,002
<CGS> 176,550
<TOTAL-COSTS> 176,550
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,807
<INCOME-PRETAX> 6,539
<INCOME-TAX> 2,592
<INCOME-CONTINUING> 3,947
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,947
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0
</TABLE>
