<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____to_____
Commission File No. 1-7604
CROWN CRAFTS, INC
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-0678148
- ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1600 RiverEdge Parkway, Suite 200, Atlanta, Georgia 30328
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(770) 644-6400
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 [ ]
The number of shares of common Stock, $1.00 par value, of the
Registrant outstanding as of August 13, 1999 was 8,608,843.
-----------------------------
<PAGE> 2
FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
JUNE 27, 1999 (UNAUDITED) AND MARCH 28, 1999
<TABLE>
<CAPTION>
June 27, March 28,
(in thousands) 1999 1999
-------------- -------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash
Accounts receivable, net: $ 1,187 $ 744
Due from factor
Other 27,943 48,042
6,063 7,355
Inventories 94,544 87,287
Deferred income taxes 776 776
Income tax recoverable 6,768 4,422
Other current assets 7,587 7,258
--------- ---------
Total Current Assets 144,868 155,884
--------- ---------
PROPERTY, PLANT AND EQUIPMENT - at cost:
Land, buildings and improvements 45,222 45,190
Machinery and equipment 96,567 92,689
Furniture and fixtures 2,111 2,100
--------- ---------
143,900 139,979
Less accumulated depreciation 63,610 60,858
--------- ---------
Property, Plant and Equipment - net 80,290 79,121
--------- ---------
OTHER ASSETS:
Goodwill 25,301 25,558
Other 4,238 4,288
--------- ---------
Total Other Assets 29,539 29,846
--------- ---------
TOTAL ASSETS $ 254,697 $ 264,851
========= =========
</TABLE>
See notes to interim consolidated financial statements.
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
JUNE 27, 1999 (UNAUDITED) AND MARCH 28, 1999
<TABLE>
<CAPTION>
June 27, March 28,
(dollars in thousands, except par value per share) 1999 1999
-------------------------------------------------- ------------ -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 54,400 $ 56,150
Accounts payable 20,140 25,339
Income taxes payable 4 8
Accrued wages and benefits 5,476 5,017
Accrued royalties 1,019 833
Other accrued liabilities 5,137 5,104
Dividends payable 258
Current maturities of long-term debt 37,243 7,243
--------- ---------
Total Current Liabilities 123,677 99,694
--------- ---------
NON-CURRENT LIABILITIES:
Long-term debt 42,857 72,857
Deferred income taxes 4,776 4,776
Other 745 745
--------- ---------
Total Non-Current Liabilities 48,378 78,378
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock - par value $1.00 per share;
50,000,000 shares authorized; 9,983,305 and
9,983,305 shares issued
9,983 9,983
Additional paid-in capital 46,096 46,096
Retained earnings 46,872 51,009
Less: 1,374,462 and 1,374,462 shares of common
stock held in treasury (20,309) (20,309)
--------- ---------
Total Shareholders' Equity 82,642 86,779
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 254,697 $ 264,851
========= =========
</TABLE>
See notes to interim consolidated financial statements.
A-3
<PAGE> 4
CONSOLIDATED STATEMENTS OF EARNINGS
JUNE 27, 1999 AND JUNE 28, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
June 27, June 28,
1999 1998
(in thousands, except per share data) ------------ ------------
-------------------------------------
<S> <C> <C>
NET SALES $ 65,787 $ 61,708
COST OF PRODUCTS SOLD 56,842 51,654
----------- -----------
GROSS PROFIT 8,945 10,054
MARKETING AND
ADMINISTRATIVE EXPENSES 12,063 12,260
----------- -----------
LOSS FROM OPERATIONS (3,118) (2,206)
OTHER INCOME (EXPENSE):
Interest expense (3,002) (1,888)
Other - net 19 82
----------- -----------
LOSS BEFORE INCOME TAXES (6,101) (4,012)
INCOME TAX CREDITS (2,274) (1,690)
----------- -----------
NET LOSS $ (3,827) $ (2,322)
=========== ===========
LOSS PER SHARE - BASIC $ (0.44) $ (0.27)
LOSS PER SHARE - DILUTED $ (0.44) $ (0.27)
AVERAGE SHARES OUTSTANDING
BASIC 8,608,843 8,545,282
=========== ===========
DILUTED 8,608,843 8,545,282
=========== ===========
DIVIDENDS DECLARED PER
SHARE $ 0.03 $ 0.03
=========== ===========
</TABLE>
See notes to interim consolidated financial statements.
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 27, 1999 AND
JUNE 28, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
(dollars in thousands) June 27, June 28,
- ---------------------- 1999 1998
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (3,827) $ (2,322)
Adjustments to reconcile net earnings to net
cash provided by (used for) operating activities;
Depreciation and amortization of property, plant
and equipment
2,848 2,659
Amortization of goodwill
258 303
Loss on sale of property, plant and equipment 24 26
Changes in assets and liabilities:
Accounts receivable
19,044 11,941
Inventories
(7,257) (17,178)
Other current assets
(329) (6,014)
Other assets 50 363
Accounts payable (5,199) 69
Income taxes payable (4) (21)
Accrued liabilities 679 (205)
-------- --------
Net cash provided by (used for) operating activities 6,287 (10,379)
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (4,120) (3,991)
Proceeds from sale of property, plant and equipment 79 3
Other (53)
-------- --------
Net cash used for investing activities (4,094) (3,988)
-------- --------
FINANCING ACTIVITIES:
Increase (decrease) in notes payable (1,750) 13,070
Exercise of stock options 2,054
Cash dividends (258)
-------- --------
Net cash (used for) provided by financing activities (1,750) 14,866
-------- --------
NET INCREASE IN CASH 443 499
CASH, beginning of period 744 809
-------- --------
CASH, end of period $ 1,187 $ 1,308
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid $ 74 $ 37
======== ========
Interest paid net of amounts capitalized $ 2,409 $ 1,827
======== ========
</TABLE>
See notes to interim consolidated financial statements.
<PAGE> 6
FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
applicable to interim financial information and the rules and
regulations of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and disclosures required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, such interim consolidated
financial statements contain all adjustments necessary to present
fairly the Company's financial position as of June 27, 1999 and the
results of its operations and its cash flows for the periods ended
June 27, 1999 and June 28, 1998. Such adjustments include normal
recurring accruals and a pro rata portion of certain estimated annual
expenses. Operating results for the three-month period ended June 27,
1999, are not necessarily indicative of the results that may be
expected for the year ending April 2, 2000. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the annual report of Form 10-K for the year ended March 28,
1999 of Crown Crafts, Inc. (the "Company").
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 may differ from those estimates.
Recently Issued Accounting Standards: In 1998, FASB issued Statement
No. 133, "Accounting for Derivative Financial Instruments and Hedging
Activities" (SFAS No. 133"). This statement requires that all
derivatives be recognized I the statement of financial position as
either assets or liabilities and measured at fair value. In addition,
all hedging relationships must be designated, reassessed and
documented pursuant to the provisions of SFAS No. 133. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999. In June
1999, FASB issued Statement No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of
FASB Statement No. 133," which amends the effective date of SFAS No.
133 to June 15, 2000. The effect on the financial statements upon
adoption of SFAS No. 133 has not been determined.
2. In 1999, the Company adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company's principal
segments include adult home furnishing and juvenile products,
consisting of bedroom products (adult comforters and accessories),
throws and decorative home accessories (primarily jacquard-woven
throws in cotton, acrylic, rayon or chenille), and juvenile products
(primarily Pillow Buddies). The second principal segment is infant
products, consisting of infant bedding, bibs, and infant soft goods.
The Company tracks revenues and operating profit information for these
two business segments.
Financial information attributable to the Company's business segments
for the quarters ended June 27, 1999 and June 28, 1998, was as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended
June 27, June 28,
Revenues: 1999 1998
---------------------------- --------- ----------
<S> <C> <C>
Adult home furnishing and
juvenile products
$ 44,076 $ 40,922
Infant products
21,711 20,786
--------- ---------
Total $ 65,787 $ 61,708
========= =========
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
Three Months Ended
June 27, June 28,
Operating income (loss): 1999 1998
---------------------------- ---------- ----------
<S> <C> <C>
Adult home furnishing and
juvenile products $ (5,185) $ (3,138)
Infant products
2,067 932
--------- ---------
Total $ (3,118) $ (2,206)
========= =========
</TABLE>
Net sales by individual product groups within these business segments
were as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
June 27, June 28,
1999 1998
---------- ----------
<S> <C> <C>
Bedroom products $ 33,761 $ 28,270
Throws and decorative
home accessories 8,565 10,768
Infant and juvenile products 23,391 22,512
Other 70 158
--------- ---------
Total net sales $ 65,787 $ 61,708
========= =========
</TABLE>
3. Interest costs of $69,000 and $26,000, respectively, were capitalized
during the quarters ended June 27, 1999, and June 28, 1998.
4. Major classes of inventory were as follows (in thousands):
<TABLE>
<CAPTION>
June 27, March 28,
1999 1999
--------- ---------
<S> <C> <C>
Raw materials $ 33,761 $ 34,300
Work in process 5,387 4,738
Finished goods
54,701 48,249
--------- ---------
$ 94,544 $ 87,287
========= =========
</TABLE>
5. At June 27, 1999, the Company was not in compliance with certain
financial covenants pertaining to its revolving credit facilities and
its 6.92% unsecured notes. Each of the lenders waived compliance with
these financial covenants for the quarter ended June 27, 1999. On
August 11, 1999, the Company concluded a restructuring of its notes
payable, revolving credit facilities and unsecured notes. The
agreements extended the maturity of the $30 million revolving credit
facilities to April 3, 2000 and reduced the additional revolving
credit facility to $15 million and extended its maturity to March 31,
2000. In addition, the agreements amended financial and other
covenants based on the Company's projections. The agreements required
the Company to grant security interests in substantially all of its
assets and adjusted the interest rate on its commercial bank
facilities to each bank's Base Rate plus 1% or the London Interbank
Offered Rate (LIBOR) plus 2.75% and adjusted the interest rate on its
6.92% notes to 10.42%. The agreements provide for the Company to
finance its seasonal working capital need by taking advances against
its factored receivables of up to $30 million.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 ISSUE
In the latter portion of the 1990s, an issue affecting most companies has
emerged regarding the ability of computer applications and systems to properly
interpret dates later than December 31, 1999. This issue arises because, until
recently, many computer
<PAGE> 8
applications were written using only the two right-most digits to define the
applicable year. Accordingly, when the need arises to enter a date after
December 31, 1999, it is unclear how any particular application will interpret
the digits 00. The so-called "Year 2000 Problem" might cause programs that
perform arithmetic operations, comparisons or date sorts to generate erroneous
results when the program is required to process dates from both centuries, and
this might result in incorrect data, system failure and other business
disruptions, including, among other things, a temporary inability to procure
materials, process transactions, send invoices and service customers.
With assistance from consultants and vendors, the Company has undertaken a
comprehensive review of the "Year 2000 compliance" of the Company's various
computer systems. Because the Company has recently concluded a general upgrade
of its computer infrastructure, and because the Company is in the process of
implementing an ERP project affecting many significant business modules, many
of the Company's computer systems have been designed and deployed with "Year
2000 compliance" as a specific requirement.
The costs incurred by the Company in assessing "Year 2000 compliance" and
performing remedial or conversion work indicated by such assessments have been
expensed as incurred. The Company estimates that the total amount of such costs
incurred through June 27, 1999 to be approximately $150,000. This amount
includes the costs of the services of outside vendors and consultants
specifically to address "Year 2000 compliance." This amount does not include
any imputed amounts for the time and effort of the Company's own employees or
for computer services, equipment and software purchased principally for reasons
other than "Year 2000 compliance." For example, the systems installed as part
of the Company's recent general computer infrastructure upgrade and the ERP
systems being deployed later this year are certified by the vendors to be Year
2000 compliant, but the Company has not attempted to allocate some portion of
the costs of those entire systems to "Year 2000 compliance." The Company does
not believe that the total costs of "Year 2000 compliance" will materially
adversely affect the Company's business operations, consolidated results of
operations, liquidity or capital resources.
The Company's business activities that rely on computer applications include
principally the following: word processing, communications and network
operations, accounting and finance, manufacturing, distribution and order
entry. With the completion in 1998 of the Company's computer infrastructure
upgrade, the Company's word processing, communications and network operations
operate based on Microsoft products including Windows NT, Windows 95 and
Microsoft Office, all of which are certified by the vendor to be Year 2000
compliant. The Company's principal accounting and finance software package is
Infinium, which also is certified by the vendor to be Year 2000 compliant. The
Company deployed in July 1999, ERP software applications supporting the
Company's accounting, finance and order entry functions, and its Georgia
manufacturing and distribution operations. SAP America, Inc. is the vendor of
these software products and certifies that they are Year 2000 compliant. The
Company's two main distribution facilities in Calhoun, Georgia, and Roxboro,
North Carolina, have "warehouse management system" software packages, each of
which has been certified by its vendor to be Year 2000 compliant. Order entry
is one of the business functions that will be performed by the ERP software
when it is deployed in 1999. Additionally, the Company has "electronic data
interchange" ("EDI") links with several of its major customers, and each of
these has been designed and deployed to be Year 2000 compliant.
In fiscal years 1998 and 1999 the Company has invested substantial sums of
money and devoted substantial time and resources to the upgrade of its computer
systems and applications, including Year 2000 compliance. Nevertheless, there
may be isolated computers or microprocessors that are not Year 2000 compliant.
However, based on the Company's on-going diligent review, the Company does not
believe that any of these will materially adversely affect the Company's
business operations, consolidated results of operations, liquidity or capital
resources.
In addition, the Company has developed and is implementing a plan for reviewing
the Year 2000 compliance of each of its significant vendors, suppliers,
financial service organizations, service providers and customers to confirm
that the Company's operations will not be materially adversely affected by the
failure of any such third party to have Year 2000 compliant computer systems.
Where appropriate, the Company intends to request assurances from such third
parties that they are addressing the Year 2000 issue and that the products and
services procured or used by the Company will function properly or will be
available without interruption in the Year 2000. Detailed questionnaires
regarding Year 2000 readiness were submitted to such third parties during the
summer of 1998, and the responses to these questionnaires have been evaluated.
Nevertheless, it will be impossible to assess fully the potential consequences
if service interruptions occur from suppliers or in infrastructure areas such
as utilities, communications, transportation, banking and government.
<PAGE> 9
As a result, the Company also is developing a business continuity plan to
minimize the impact of such external events. The Company's "Year 2000
compliance" efforts are ongoing and its overall plan, as well as its
development of a business continuity plan, will continue to evolve as new
information becomes available.
While its efforts to address Year 2000 issues will involve additional costs and
the time and effort of a number of employees, the Company believes, based on
currently available information, that it will be able to manage properly its
total Year 2000 exposure. There can be no assurance, however, that it will be
successful in its effort or that the computer systems of other companies on
which the Company will rely will be timely modified, or that a failure to
modify such systems by another company or modifications that are incompatible
with its systems would not have a material adverse effect on the Company's
business operations, consolidated results of operations, liquidity and capital
resources.
Even though the software systems being installed by the Company have been
certified to be Year 2000 compliant, the software vendors may issue software
patches to address additional Year 2000 issues that may manifest themselves
later that are not covered in the current versions of the software.
At this time, the Company believes that the most likely worst-case scenario
would result from disruptions experienced by third parties such as suppliers,
utilities, and banking institutions. Such disruptions could have a material
adverse effect on the Company's operations, liquidity and financial condition.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 27, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 28,
1998
Net sales increased $4.1 million or 6.6% to $65.8 million in the current year
quarter compared to $61.7 million in the prior year quarter. The increase was
attributable to an increase of $5.5 million or 19.4% of bedroom products,
off-set by a $2.2 million decline in throws and decorative home accessories.
Sales of infant and juvenile products increased modestly quarter-to-quarter,
from $22.5 million to $23.4 million. The increase in bedroom products resulted
from the addition of the Calvin Klein Home product line and from an increase in
the sales of woven bedcoverings. The decrease in the sales of throws and
decorative home accessories is directly related to the increase in woven
bedcoverings, as manufacturing capacity for woven products was shifted to this
product line. In addition, in March, 1999, the Company sold Textile, Inc., a
weaving facility in Ronda, North Carolina, as a planned reduction in capacity
for the throws and decorative home accessories product group.
For the quarter ended June 27, 1999, gross profit as a percentage of net sales
decreased to 13.6% from 16.3% for the quarter ended June 28, 1998. There were
principally two reasons for the decline in gross profits. First was the
continuing sale of close-out inventory, for which the Company had established
reserves in the fourth quarter of its fiscal year ended March 28, 1999. During
the quarter ended June 27, 1999, sales of such inventory totaled approximately
$6 million which had the effect of reducing the gross profit percentage by
approximately 1.4%. The second reason for the decline in the gross profit
percentage relates to the under-absorption of overhead costs at the Company's
Roxboro, North Carolina manufacturing facilities, as the Company continues its
transition to the Calvin Klein Home line of products and adjusts its capacity
for the anticipated level of manufacturing and distribution activity.
Marketing and administrative expenses decreased by $197,000 in the current year
quarter compared to the same quarter in the prior fiscal year and were 18.3% of
net sales versus 19.9%. The primary reason for the decrease was the fewer
number of stores in the Company's retail division compared to the same period
last year.
Interest expense for the quarter increased by $1.1 million because of higher
levels of borrowings and higher effective interest rates.
The effective income tax rate at 37.3%, returned to normal levels in the
quarter compared to the prior year quarter. In the quarter ended June 28, 1998,
the effective tax rate at 42.1% was affected by non-deductible expenses
associated with acquisitions and by higher effective state income tax rates.
<PAGE> 10
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
At June 27, 1999, the Company maintained uncommitted lines of credit totaling
$40 million with two commercial banks at floating interest rates, against which
a total of $29.4 million of borrowings at an interest rate of 8.25% and $2.4
million of letters of credit were outstanding. The Company also maintained
unsecured committed revolving credit facilities totaling $30 million with two
commercial banks at interest rates based on each bank's Base Rate plus 0.5%. At
June 27, 1999, borrowings of $30 million were outstanding under these
facilities at an interest rate of 8.25%. The Company pays facility fees on the
unused portions of these committed credit lines. These credit facilities
expired on June 30, 1999 and subsequently were extended by a renegotiation of
their terms in August, 1999. Among other covenants, these revolving credit
facilities contain a requirement that the Company maintain minimum levels of
shareholders' equity. At June 27, 1999, the Company was not in compliance with
the required level of shareholders' equity which could restrict the future
payment of cash dividends. Other covenants of these revolving credit facilities
require the Company to maintain certain financial ratios and place restriction
on the amounts the Company may expend on acquisitions and purchases of treasury
stock.
In July 1998, the Company obtained an additional $25 million unsecured
committed revolving credit facility from one of its commercial banks. The
facility had an initial expiration date of August 25, 1998, but has been
extended by a renegotiation of its terms in August, 1999. This credit facility
carried an interest rate of the bank's Base Rate plus 0.5%. At June 27, 1999,
the Company had borrowings of $25 million under this facility.
The Company's 6.92% unsecured notes in the amount of $50,000,000 are placed
with an insurance company and are due in annual installments of $7,142,857 from
October 1999 through October 2005. The 6.92% notes and the unsecured 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 June 27, 1999, the Company was
not in compliance with certain provisions of its unsecured revolving credit
facilities and its 6.92% unsecured notes. Each lender has waived compliance
with these provisions of its agreement for the quarter ended June 27, 1999.
On July 16, 1999, the Company reached agreement in principle with its two
commercial banks and with the holders of its 6.92% unsecured notes to
restructure certain provisions of its borrowing arrangements. Among other
things, the agreement in principle extends the maturity of the $30 million
revolving credit facilities to April 3, 2000, and of the additional revolving
credit facility, in the reduced amount of $15 million, to March 31, 2000, and
adjusts financial and other covenants based on the Company's projections. In
exchange, the Company has agreed to grant security interests in substantially
all of its assets and to adjust the interest rate on its bank facilities to
either each bank's Base Rate plus 1% or the London Interbank Offered Rate
(LIBOR) plus 2.75% and on the notes placed with an insurance company to 10.42%.
The Company closed the facilities represented by the agreement in principle on
August 11, 1999.
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 receivable balances. The factor remits payment to the Company on the
due dates of the factored invoices. 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 at any time may
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.
The agreement in principle with its senior lenders, described above, provides
for the Company to finance its seasonal working capital needs by taking
advances against its factored receivables of up to $30 million.
Total debt outstanding decreased to $134.5 million at June 27, 1999 from $136.3
million at March 28, 1999. This decrease is the result of a $19 million
decrease in accounts receivable, off-set by an increase in inventories and a
reduction in accounts payable. The increase in inventories reflects a normal
seasonal pattern, but is less than in comparable other periods because of the
Company's continuing emphasis on inventory reduction through the disposition of
close-outs, as discussed above.
<PAGE> 11
FORWARD-LOOKING INFORMATION
This Form 10Q contains forward-looking statements within the meaning of the
federal securities law. Such statements are based upon management's current
expectations, projections, estimates and assumptions. Words such as "expects,"
"believes," "anticipates" and variations of such words and similar expressions
are intended to identify such forward-looking statements. Forward-looking
statements involve known and unknown risks and uncertainties that may cause
future results to differ materially from those anticipated. These risks
include, among others, general economic conditions, changing competition, the
level and pricing of future orders from the Company's customers, the Company's
dependence upon third-party suppliers, including some located in foreign
countries with unstable political situations, the Company's ability to
successfully implement new information technologies, the Company's ability to
integrate its acquisitions and new licenses, and the Company's ability to
implement improvements in its acquired businesses.
ITEM 3 - QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on debt,
commodity prices and foreign exchange rates.
The Company's exposure to interest rate risk relates to its floating rate debt,
$84,400,000 of which was outstanding at June 27, 1999.
The Company's exposure to commodity price risk primarily relates to changes in
the price of cotton, which is a principal raw material in a substantial number
of the Company's products. To manage this risk, from time to time the Company
enters into commodity future contracts and forward purchase contracts. No such
contracts were outstanding at June 27, 1999.
The Company's exposure to foreign exchange rates relates to its Mexican
manufacturing subsidiary. During the fiscal year ended March 28, 1999, this
subsidiary manufactured products for the Company with a value of approximately
$7.2 million. The Company's investment in the subsidiary was approximately $4.3
million at June 27, 1999.
<PAGE> 12
FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
From time to time, the Company is involved in various legal
proceedings relating to claims arising in the ordinary course of its
business. Neither the Company nor any of its subsidiaries is a party
to any such legal proceeding the outcome of which, individually or in
the aggregate, is expected to have a material adverse effect on the
Company's financial condition or results of operations.
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
At June 27, 1999, the Company was not in compliance with certain
financial covenants pertaining to its revolving credit facilities and
its 6.92% unsecured notes. Each of the lenders waived compliance with
these financial covenants for the quarter ended June 27, 1999.
Item 4 - Submission of Matters to Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
27 Financial Data Schedule (for SEC use only)
There were no reports on Form 8-K during the quarter ended June 27,
1999.
<PAGE> 13
FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
JUNE 27, 1999
SIGNATURES
Pursuant to the requirements 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.
Date: August 16, 1999 /s/ David S. Fraser
------------------------- --------------------------------------
DAVID S. FRASER
(Chief Accounting Officer)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-02-2000
<PERIOD-START> MAR-29-1999
<PERIOD-END> JUN-27-1999
<CASH> 1,187
<SECURITIES> 0
<RECEIVABLES> 40,774
<ALLOWANCES> 0
<INVENTORY> 94,544
<CURRENT-ASSETS> 144,868
<PP&E> 143,900
<DEPRECIATION> 63,610
<TOTAL-ASSETS> 254,697
<CURRENT-LIABILITIES> 123,677
<BONDS> 42,857
0
0
<COMMON> 9,983
<OTHER-SE> 72,659
<TOTAL-LIABILITY-AND-EQUITY> 254,697
<SALES> 65,787
<TOTAL-REVENUES> 65,787
<CGS> 56,842
<TOTAL-COSTS> 56,842
<OTHER-EXPENSES> 12,063
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,002
<INCOME-PRETAX> (6,101)
<INCOME-TAX> (2,274)
<INCOME-CONTINUING> (3,827)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,827)
<EPS-BASIC> (.44)
<EPS-DILUTED> (.44)
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