Note 1 – Summary of Significant Accounting Policies

Basis of Presentation:The accompanying unaudited consolidated financial statements include the accounts of Crown Crafts, Inc. (the “Company”) and its subsidiaries and have been prepared in accordance with U.S.accounting principles generally accepted accounting principlesin the United States (“GAAP”) applicable to interim financial information as promulgated by the Financial Accounting Standards Board (“FASB”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. References herein to GAAP are to topics within the FASB Accounting Standards Codification (the “FASB ASC”), which the FASB periodically revises through the issuance of an Accounting Standards Update (“ASU”) and which has been established by the FASB as the authoritative source for GAAP recognized by the FASB to be applied by nongovernmental entities.

In the opinion of management, thesethe interim unaudited consolidated financial statements containcontained herein include all adjustments necessary to present fairly the financial position of the Company as of DecemberJune 28, 20142015 and the results of its operations and cash flows for the periods presented. Such adjustments include normal, recurring accruals, as well as the elimination of all significant intercompany balances and transactions. Operating results for the three and nine-month periodsthree-month period ended DecemberJune 28, 20142015 are not necessarily indicative of the results that may be expected by the Company for its fiscal year ending March 29, 2015.April 3, 2016. For further information, refer to the Company’s consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended

March 30, 2014.29, 2015.

Reclassifications:The Company has reclassified certain prior year information to conform to the amounts presented in the current year. None of the changes impact the Company’s previously reported financial position or results of operations.

Fiscal Year: The Company’s fiscal year ends on the Sunday that is nearest to or on March 31. References herein to “fiscal year 2016” or “2016” represent the 53-week period ending April 3, 2016 and references herein to “fiscal year 2015” or “2015” represent the 52-week period endingended March 29, 2015 and references herein to “fiscal year 2014” or “2014” represent the 52-week period ended March 30, 2014.2015.

Use of Estimates:The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the accompanying consolidated balance sheets and the reported amounts of revenues and expenses during the periods presented on the accompanying consolidated statements of income and cash flows. Significant estimates are made with respect to the allowances related to accounts receivable for customer deductions for returns, allowances and disputes. The Company also has a certain amount of discontinued finished goods which necessitates the establishment of inventory reserves and allocates indirect costs to inventory based on an estimated percentage of the supplier purchase price, each of which is highly subjective. Actual results could differ from those estimates.

Cash and Cash Equivalents: The Company considers highly-liquid investments, if any, purchased with original maturities of three months or less to be cash equivalents. The Company’s credit facility consists of a revolving line of credit under a financing agreement with The CIT Group/Commercial Services, Inc. (“CIT”), a subsidiary of CIT Group, Inc. The Company classifies a negative balance outstanding under this revolving line of credit as cash, as these amounts are legally owed to the Company and are immediately available to be drawn upon by the Company.

Financial Instruments: For short-term instruments such as cash and cash equivalents, accounts receivable and accounts payable, the Company uses carrying value as a reasonable estimate of the fair value.

Segment and Related Information:The Company operates primarily in one principal segment, infant, toddler and juvenile products. These products consist of infant and toddler bedding, bibs, soft bath products, disposable products and accessories. Net sales of bedding, blankets and accessories and net sales of bibs, bath and disposable products for the three and nine-months ended December 28, 2014 and December 29, 2013 are as follows (in thousands):

Advertising Costs:The Company’s advertising costs are primarily associated with cooperative advertising arrangements with certain of the Company’s customers and are recognized using the straight-line method based upon aggregate annual estimated amounts for those customers, with periodic adjustments to the actual amounts of authorized agreements. Advertising expense is included in other marketing and administrative expenses in the accompanying consolidated statements of income and amounted to $376,000$305,000 and $213,000$234,000 for the three-month periods ended DecemberJune 28, 2015 and June 29, 2014, respectively.

Segment and December 29, 2013, respectively,Related Information: The Company operates primarily in one principal segment, infant, toddler and $842,000juvenile products. These products consist of infant and $655,000toddler bedding, bibs, soft bath products, disposable products and accessories. Net sales of bedding, blankets and accessories and net sales of bibs, bath and disposable products for the nine-monththree-month periods ended DecemberJune 28, 2015 and June 29, 2014 and December 29, 2013, respectively.are as follows (in thousands):

Revenue Recognition: Sales are recorded when goods are shipped to customers and are reported net of allowances for estimated returns and allowances in the accompanying consolidated statements of income. Allowances for returns are estimated based on historical rates. Allowances for returns, cooperative advertising allowances, warehouse allowances, placement fees and volume rebates are recorded commensurate with sales activity or using the straight-line method, as appropriate, and the cost of such allowances is netted against sales in reporting the results of operations. Shipping and handling costs, net of amounts reimbursed by customers, are not material and are included in net sales.

Allowances Against Accounts Receivable: The Company’s allowances against accounts receivable are primarily contractually agreed-upon deductions for items such as cooperative advertising and warehouse allowances, placement fees and volume rebates. These deductions are recorded throughout the year commensurate with sales activity or using the straight-line method, as appropriate. Funding of the majority of the Company’s allowances occurs on a per-invoice basis. The allowances for customer deductions, which are netted against accounts receivable in the consolidated balance sheets, consist of agreed upon advertising support, placement fees, markdowns and warehouse and other allowances. All such allowances are recorded as direct offsets to sales, and such costs are accrued commensurate with sales activities or as a straight-line amortization charge of an agreed-upon fixed amount, as appropriate to the circumstances for each such arrangement. When a customer requests deductions, the allowances are reduced to reflect such payments or credits issued against the customer’s account balance. The Company analyzes the components of the allowances for customer deductions monthly and adjusts the allowances to the appropriate levels. The timing of funding requests for advertising support can cause the net balance in the allowance account to fluctuate from period to period. The timing of such funding requests should have no impact on the consolidated statements of income since such costs are accrued commensurate with sales activity or using the straight-line method, as appropriate.

To reduce the exposure to credit losses and to enhance the predictability of its cash flows, the Company assigns the majority of its trade accounts receivable under factoring agreements with CIT. In the event a factored receivable becomes uncollectible due to creditworthiness, CIT bears the risk of loss. The Company’s management must make estimates of the uncollectibility of its non-factored accounts receivable to evaluate the adequacy of the Company’s allowance for doubtful accounts, which is accomplished by specifically analyzing accounts receivable, historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in its customers’ payment terms. The Company’s provision for doubtful accounts is included in other marketing and administrative expenses in the accompanying unaudited consolidated statements of income and amounted to $8,000 for each of the three and nine-month periods ended December 28, 2014, and $74,000 for each of the three and nine-month periods ended December 29, 2013.

The Company’s accounts receivable as of DecemberJune 28, 20142015 was $21.8$16.3 million, net of allowances of $978,000.$1.1 million. Of this amount, $19.2$15.2 million was due from CIT under the factoring agreements, and an additional $474,000$7.9 million was due from CIT as a negative balance outstanding under the revolving line of credit.credit, and $338,000 was due from CIT as the United States Dollar equivalent of amounts that had been collected, but not yet remitted, under Canadian factoring agreements with CIT. The combined amount of $19.7$23.4 million represents the maximum loss that the Company could incur if CIT failed completely to perform its obligations under the factoring agreements and the revolving line of credit.

Royalty Payments: The Company has entered into agreements that provide for royalty payments based on a percentage of sales with certain minimum guaranteed amounts. These royalties are accrued based upon historical sales rates adjusted for current sales trends by customers. Royalty expense is included in cost of sales in the accompanying consolidated statements of income and amounted to $1.8 million and $1.4 million for the three-month periods ended June 28, 2015 and June 29, 2014, respectively.

Depreciation and Amortization: The accompanying consolidated balance sheets reflect property, plant and equipment, and certain intangible assets at cost less accumulated depreciation or amortization. The Company capitalizes additions and improvements and expenses maintenance and repairs as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, which are three to eight years for property, plant and equipment, and one to twenty years for intangible assets other than goodwill. The Company amortizes improvements to its leased facilities over the term of the lease or the estimated useful life of the asset, whichever is shorter.

Valuation of Long-Lived Assets andIdentifiable Intangible Assets:In addition to the depreciation and amortization procedures set forth above, the Company reviews for impairment long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. In the event of impairment, the asset is written down to its fair market value.

Patent Costs:The Company incurs certain legal and associated costs in connection with its patent applications.applications for patents. The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or an alternative future use for the underlying product is available to the Company. The Company also capitalizes legal and other costs incurred in the protection or defense of the Company’s patents whento the extent that it is believed that the future economic benefit of the patent will be maintained or increased and a successful outcome of the litigation is probable. Capitalized patent protection or defense costs are amortized over the remaining expected life of the related patent. The Company’s assessment of the future economic benefit of its patents involves considerable management judgment, and a different conclusion could result in a material impairment charge amountingup to the carrying value of these assets.

Royalty Payments: The Company has entered into agreements that provide for royalty payments based on a percentage of sales with certain minimum guaranteed amounts. These royalties are accrued based upon historical sales rates adjusted for current sales trends by customers. Royalty expense is included in cost of sales in the accompanying unaudited consolidated statements of income and amounted to $2.5 million and $1.9 million for the three-month periods ended December 28, 2014 and December 29, 2013, respectively, and $5.9 million and $5.3 million for the nine-month periods ended December 28, 2014 and December 29, 2013, respectively.

Inventory Valuation: The preparation of the Company's financial statements requires careful determination of the appropriate dollar amount of the Company's inventory balances. Such amount is presented as a current asset in the accompanying consolidated balance sheets and is a direct determinant of cost of goodsproducts sold in the accompanying consolidated statements of income and, therefore, has a significant impact on the amount of net income in the accounting periods reported. The basis of accounting for inventories is cost, which includes the direct supplier acquisition cost, duties, taxes and freight, and the indirect costs incurred to design, develop, source and store the product until it is sold. Once cost has been determined, the Company’s inventory is then stated at the lower of cost or market, with cost determined using the first-in, first-out ("FIFO") method, which assumes that inventory quantities are sold in the order in which they are acquired.

The indirect costs allocated to inventory are done so as a percentage of projected annual supplier purchases and can impact the Company’s results of operations as purchase volume fluctuates from quarter to quarter and year to year. The difference between indirect costs incurred and the indirect costs allocated to inventory creates a burden variance, which is generally favorable when actual inventory purchases exceed planned inventory purchases, and is generally unfavorable when actual inventory purchases are lower than planned inventory purchases. While the burden variance can be significant during interim periods, it is generally not material by the end of each fiscal year. The determination of the indirect charges and their allocation to the Company's finished goods inventories is complex and requires significant management judgment and estimates. If management made different judgments or utilized different estimates, then differences would result in the valuation of the Company's inventories, the amount and timing of the Company's cost of goodsproducts sold and the resulting net income for any accounting period.

On a periodic basis, management reviews the Company’s inventory quantities on hand for obsolescence, physical deterioration, changes in price levels and the existence of quantities on hand which may not reasonably be expected to be sold within the normal operating cycle of the Company's operations. To the extent that any of these conditions is believed to exist or the market value of the inventory expected to be realized in the ordinary course of business is otherwise no longer as great as its carrying value, an allowance against the inventory value is established. To the extent that this allowance is established or increased during an accounting period, an expense is recorded in cost of goodsproducts sold in the Company's consolidated statements of income. Only when inventory for which an allowance has been established is later sold or is otherwise disposed of is the allowance reduced accordingly. Significant management judgment is required in determining the amount and adequacy of this allowance. In the event that actual results differ from management's estimates or these estimates and judgments are revised in future periods, the Company may not fully realize the carrying value of its inventory or may need to establish additional allowances, either of which could materially impact the Company's financial position and results of operations.

Provision for Income Taxes: The Company’s provision for income taxes includes all currently payable federal, state, local and foreign taxes and is based upon the Company’s estimated annual effective tax rate, which is based on the Company’s forecasted annual pre-tax income, as adjusted for certain expenses within the consolidated statements of income that will never be deductible on the Company’s tax returns and certain charges expected to be deducted on the Company’s tax returns that will never be deducted on the consolidated statements of income, multiplied by the statutory tax rates for the various jurisdictions in which the Company operates and reduced by certain anticipated tax credits. 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 that will be in effect when the differences are expected to reverse. The Company’s policy is to recognize the effect that a change in enacted tax rates would have on net deferred income tax assets and liabilities in the period that the tax rates are changed.

The Company files income tax returns in the many jurisdictions within which it operates, including the U.S., several U.S. states and the People’s Republic of China. The statute of limitations for the Company’s filed income tax returns varies by jurisdiction; tax years open to federal, state or Chinese audit or other adjustment as of DecemberJune 28, 20142015 were the fiscal years ended April 1, 2012, March 31, 2013, and March 30, 2014 and March 29, 2015, as well as the fiscal year ended

April 3, 2011 for several states.

Earnings Per Share:The Company calculates basic earnings per share by using a weighted average of the number of shares outstanding during the reporting periods. Diluted shares outstanding are calculated in accordance with the treasury stock method, which assumes that the proceeds from the exercise of all exercisable options would be used to repurchase shares at market value. The net number of shares issued after the exercise proceeds are exhausted represents the potentially dilutive effect of the options, which are added to basic shares to arrive at diluted shares.

Recently-Issued Accounting Standards: On May 28, 2014,July 22, 2015, the FASB issued ASUAccounting Standards Update (“ASU”) No. 2014-09,2015-11, Revenue from Contracts with CustomersInventory (Topic 330):Simplifying the Measurement of Inventory, which will replace mostclarify that after an entity determines the cost of its inventory, the subsequent measurement and presentation of such inventory should be at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs expected to be borne by the selling entity for completion, disposal and transportation. When the determination is made that the net realizable value of inventory has decreased to an amount that is less than the cost of the inventory, then the inventory should be presented at such net realizable value, with a corresponding charge to earnings in the period in which the determination occurs. The decline in net realizable value typically occurs as the result of damage, physical deterioration, obsolescence, changes in overall price levels, or other causes. Where practicable, the determination of the net realizable value of inventory on a subsequent measurement date should be applied separately to each item of the inventory. The measurement and presentation of inventory in accordance with this ASU differs from existing revenue guidanceGAAP in GAAP when it becomesthat the subsequent measurement of inventory by an entity is currently required to be at the lower of cost or market. Such measurement was seen as unnecessarily complex because market could be calculated as replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. The ASU will become effective onfor the first dayinterim period of the fiscal year beginning after December 15, 2016. EarlyThe ASU should be applied prospectively, and early adoption is not permitted. The Company intends to adopt ASU No. 2015-11 on April 3, 2017, and is currently evaluating the effect that the adoption of the ASU 2014-09 will have on its financial position, results of operations and related disclosures.

On April 7, 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which will require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, and which will lead to a presentation consistent with the long-standing presentation of debt discounts. The ASU will become effective for the first interim period of the fiscal year beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued, with a retrospective presentation within each balance sheet. When the Company’s financing agreement with CIT was amended on May 21, 2013 to extend its maturity date to July 11, 2016, CIT did not charge the Company any debt issuance costs, and the Company’s legal and other costs incurred in connection with the extension of the financing agreement were not material. As of June 28, 2015 and March 29, 2015, there was no balance owed on the Company’s revolving line of credit and the Company had no other structured debt. If the Company again extends its financing agreement with CIT to beyond July 11, 2016, or otherwise enters into any new structured debt arrangements, and if there are any debt issuance costs associated with such an extension or such new structured debt arrangements, then the Company does not anticipate that the adoption by the Company of ASU No. 2015-03 on April 4, 2016 will have a material impact on the Company’s financial position, results of operations and related disclosures.

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which will replace most existing GAAP guidance on revenue recognition, will require the use of more estimates and judgements, as well as additional disclosures. When issued, ASU No. 2014-09 was to become effective in the fiscal year beginning after December 15, 2016, but on July 9, 2015 the FASB approved a one-year deferral of the effective date. Early adoption was originally not permitted in ASU No. 2014-09, but on July 9, 2015 the FASB voted to allow early adoption in the first interim period of the fiscal year beginning after December 15, 2016. The Company is currently evaluating the effect that ASU 2014-09 and the companion actions approved by the FASB on July 9, 2015 will have on its financial position, results of operations and related disclosures.

The Company has determined that all other ASU’s issued which were in effect, or which will become effective at some future date, are not expected to have a material impact on the Company’s consolidated financial statements.

Note2 – Goodwill, Customer Relationshipsand Other Intangible Assets

Goodwill: Goodwill represents the excess of the purchase price over the fair value of net identifiable assets acquired in business combinations. The Company considers its wholly-owned subsidiaries, Crown Crafts Infant Products, Inc. (“CCIP”) and Hamco, Inc. (“Hamco”), to each be a reporting unit of the Company for the purpose of presenting and testing for the impairment of goodwill. The goodwill of the reporting units of the Company as of DecemberJune 28, 20142015 and March 30, 201429, 2015 amounted to $24.0 million, and is reflected in the accompanying consolidated balance sheets net of accumulated impairment charges of $22.9 million, for a net reported balance of $1.1 million.

The CompanytestsCompany tests the fair value of the goodwill, if any, within its reporting units annually as of the first day of the Company’s fiscal year. An additional interim impairment test is performed during the year whenever an event or change in circumstances occurs that suggests that the fair value of the goodwill of either of the reporting units of the Company has more likely than not(definednot (defined as having a likelihood of greater than 50%)fallen below its carrying value. The annual or interim impairment test is performed by firstassessingfirst assessing qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If such qualitative factors so indicate, then the impairment test is continuedincontinued in a two-step approach. The first step is the estimation of the fair value of each reporting unit to ensure that its fair value exceeds its carrying value. If step one indicates that a potential impairment exists, then the second step is performed to measure the amount of an impairment charge, if any. In the second step, these estimated fair values are used as the hypothetical purchase price for the reporting units, and an allocation of such hypothetical purchase price is made to the identifiable tangible and intangible assets and assigned liabilities of the reporting units. The impairment charge is calculated as the amount, if any, by which the carrying value of the goodwill exceeds the implied amount of goodwill that results from this hypothetical purchase price allocation.

The annual impairment test of the fair value of the goodwill of the reporting units of the Company was performed as of March 31, 2014,30, 2015, and the Company concluded that the fair value of the goodwill of the Company’s reporting units substantially exceeded their carrying values as of that date.

Other Intangible Assets: Other intangible assets at DecemberJune 28, 20142015 and March 29, 2015 consisted primarily of the fair value of net identifiable assets acquired in business combinations, other than tangible assets and goodwill. The grosscarrying amount and accumulated amortization of the Company’s other intangible assets as of DecemberJune 28, 20142015 and March 30, 2014,29, 2015, the amortization expense for the three and nine-monththree-month periods ended DecemberJune 28, 20142015 and DecemberJune 29, 20132014 and the classification of such amortization expense within the accompanying unaudited consolidated statements of income are as follows (in thousands):

Note3 – Inventories

Major classes of inventory were as follows (in thousands):

Note4 – Stock-based Compensation

The Company has two incentive stock plans, the 2006 Omnibus Incentive Plan (the “2006 Plan”) and the 2014 Omnibus Equity Compensation Plan (the “2014 Plan”). As a result of the approval of the 2014 Plan by the Company’s stockholders at the Company’s 2014 annual meeting, grants may no longer be issued under the 2006 Plan.

The Company believes that awards of long-term, equity-based incentive compensation will attract and retain directors, officers and employees of the Company and will encourage these individuals to contribute to the successful performance of the Company, which will lead to the achievement of the Company’s overall goal of increasing stockholder value. Awards granted under the 2014 Plan may be in the form of incentive stock options, non-qualified stock options, shares of stock (including restricted shares),or unrestricted stock, stock units, stock appreciation rights or other stock-based awards. Awards may be granted subject to the achievement of performance goals or other conditions, and certain awards may be payable in stock or cash, or a combination of the two. The 2014 Plan is administered by the Compensation Committee of the Company’s Board of Directors (the “Board”), which selects eligible employees, consultants, advisorsnon-employee directors and non-employee directorsother individuals to participate in the 2014 Plan and determines the type, amount, duration and other terms of individual awards. At DecemberJune 28, 2014, 1.22015, 1.0 million shares of the Company’s common stock were available for future issuance under the 2014 Plan.

Stock-based compensation expense is calculated according to FASB ASC Topic 718,Compensation – Stock Compensation, which requires stock-based compensation expense to be accounted for using a fair-value-based measurement. The Company recorded stock-based compensation expense of $225,000$256,000 and $131,000$215,000 during the three-month periods ended DecemberJune 28, 20142015 and DecemberJune 29, 2013, respectively, and recorded $652,000 and $487,000 during the nine-month periods ended December 28, 2014, and December 29, 2013, respectively. The Company records the compensation expense related to stock-based awards granted to individuals in the same expense classifications as the cash compensation paid to those same individuals. No stock-based compensation costs have been capitalized as part of the cost of an asset as of DecemberJune 28, 2014.2015.

Stock Options:The following table represents stock option activity forthe nine-monththree-month periods ended DecemberJune 28, 20142015 and DecemberJune 29, 2013:2014:

Note5 – Financing Arrangements

Factoring Agreements:     The Company assigns the majority of its trade accounts receivable to CIT under factoring agreements whose expiration dates are coterminous with that of the financing agreement described below. Under the terms of the factoring agreements, CIT remits customer payments to the Company as such payments are received by CIT.

CIT bears credit losses with respect to assigned accounts receivable from approved customers that are within approved credit limits, while the Company bears the responsibility for adjustments from customers related to returns, allowances, claims and discounts. CIT may at any time terminate or limit its approval of shipments to a particular customer. If such a termination were to occur, the Company must either assume the credit risk for shipments after the date of such termination or limitation or cease shipments to such customer. Factoring fees, which are included in marketing and administrative expenses in the accompanying unaudited consolidated statements of income, were $187,000$116,000 and $134,000$107,000 for the three-month periods ended DecemberJune 28, 20142015 and DecemberJune 29, 2013, respectively, and were $453,000 and $331,000 for the nine-month periods ended December 28, 2014, and December 29, 2013, respectively. There were no advances from the factor at DecemberJune 28, 20142015 or March 30, 2014.29, 2015.

Credit Facility:     The Company’s credit facility at DecemberJune 28, 20142015 consisted of a revolving line of credit under a financing agreement with CIT of up to $26.0 million, which includes a $1.5 million sub-limit for letters of credit, with an interest rate of prime minus 0.50% or LIBOR plus 2.00%. The financing agreement matures on July 11, 2016 and is secured by a first lien on all assets of the Company. As of DecemberJune 28, 2014,2015, the Company had elected to pay interest on balances owed under the revolving line of credit, if any, under the LIBOR option. The financing agreement also provides for the payment by CIT to the Company of interest at the rate of prime minus 2.00%, which was 1.25% at DecemberJune 28, 2014,2015, on daily cash balances held at CIT.

Under the financing agreement, a fee is assessed based on 0.125% of the average unused portion of the $26.0 million revolving line of credit, less any outstanding letters of credit (the “Commitment Fee”). The Commitment Fee was $8,000 for each of the three-month periods ended DecemberJune 28, 20142015 and DecemberJune 29, 2013, and was $25,000 and $32,000 for the nine months ended December2014. At June 28, 2014 and December 29, 2013, respectively. At December 28, 2014,2015, there was no balance owed on the revolving line of credit, there was no letter of credit outstanding and the full amount of the credit facility of $26.0Company had $24.0 million was available under the revolving line of credit based on the Company'sCompany’s eligible accounts receivable and inventory balances.

The financing agreement for the revolving line of credit contains usual and customary covenants for agreements of that type, including limitations on other indebtedness, liens, transfers of assets, investments and acquisitions, merger or consolidation transactions, transactions with affiliates and changes in or amendments to the organizational documents for the Company and its subsidiaries. The Company was in compliance with these covenants as of DecemberJune 28, 2014.2015.

Note6 – Legal Settlement

BreathableBaby, LLC (“BreathableBaby”) filed a complaint against the Company and CCIP on January 11, 2012 in the United States District Court for the District of Minnesota, which alleged that CCIP’s mesh crib liner infringed upon BreathableBaby’s patent rights relating to its air permeable infant bedding technology. During the three-month period ended September 28, 2014, the Company recorded a charge of $850,000 in connection with a then-preliminary agreement that had been reached with BreathableBaby to settle this matter. The Company and BreathableBaby reached a final settlement on December 5, 2014 under the terms of which the Company now manufactures and sells a redesigned mesh crib liner product. The Company also made a one-time payment of $850,000 to BreathableBaby on December 11, 2014 in connection with the settlement, which amount had previously been recognized as disclosed above. The recognition of the $850,000 charge, which has been classified as legal expense in the accompanying unaudited consolidated statements of income, had the effect of reducing, on an after-tax basis, the Company’s net income for the nine-month period ended December 28, 2014 by approximately $530,000, or $0.05 per diluted share.

Note7 – Subsequent Events

The Company has evaluated events which have occurred between DecemberJune 28, 20142015 and the date that the accompanying consolidated financial statements were issued, and has determined that there are no material subsequent events that require disclosure.