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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 30, 1996
( ) 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.
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(Exact name of registrant as specified in its charter)
Georgia 58-0678148
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1600 RiverEdge Parkway, Suite 200, Atlanta, Georgia 30328
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(Address of principal executive offices)
(770) 644-6400
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(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
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The number of shares of common Stock, $1.00 par value, of the Registrant
outstanding as of August 8, 1996 was 7,944,201.
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FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
PART 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 (UNAUDITED) AND MARCH 31, 1996
June 30, March 31,
(in thousands) 1996 1996
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ASSETS
CURRENT ASSETS
Cash $ 281 $ 517
Accounts receivable, net:
Due from factor 14,247 27,943
Other 11,952 12,901
Inventories 56,219 47,269
Deferred income taxes 1,487 1,510
Other current assets 3,643 3,474
-------- --------
Total Current Assets 87,829 93,614
-------- --------
PROPERTY, PLANT AND EQUIPMENT - at cost:
Land, buildings and improvements 45,035 44,274
Machinery and equipment 65,342 65,782
Furniture and fixtures 1,574 1,544
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111,951 111,600
Less accumulated depreciation 35,625 34,265
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Property, Plant and Equipment - net 76,326 77,335
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OTHER ASSETS
Goodwill 13,383 13,526
Other 1,553 1,223
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Total Other Assets 14,936 14,749
-------- --------
TOTAL $179,091 $185,698
======== ========
See notes to interim consolidated financial statements.
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FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS (continued)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 (UNAUDITED) AND MARCH 31, 1996
June 30, March 31,
(dollars in thousands, except par value per share) 1996 1996
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 16,750 $ 1,180
Accounts payable 13,255 12,480
Income taxes payable 94 46
Accrued wages and benefits 3,848 3,607
Other accrued liabilities 3,159 3,332
Current maturities of long-term debt 2,600 5,100
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Total Current Liabilities 39,706 25,745
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LONG-TERM DEBT 50,300 69,300
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DEFERRED INCOME TAXES 6,937 6,936
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OTHER LIABILITIES 713 700
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SHAREHOLDERS' EQUITY:
Common stock - par value $1.00 per share;
50,000,000 shares authorized; 9,050,636
shares issued 9,051 9,051
Additional paid-in capital 34,438 34,438
Retained earnings 52,745 54,327
Less:
1,106,435 shares of common
stock held in treasury (14,799) (14,799)
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Total Shareholders' Equity 81,435 83,017
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TOTAL $179,091 $ 185,698
======== =========
See notes to interim consolidated financial statements.
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FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS (Continued)
CONSOLIDATED STATEMENTS OF EARNINGS
JUNE 30, 1996 AND JULY 2, 1995
(UNAUDITED)
June 30, July 2,
(in thousands, except per share data) 1996 1995
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NET SALES $ 44,400 $ 39,207
COST OF PRODUCTS SOLD 37,488 31,656
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GROSS PROFIT 6,912 7,551
MARKETING AND
ADMINISTRATIVE EXPENSES 8,214 6,546
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EARNINGS (LOSS) FROM OPERATIONS (1,302) 1,005
OTHER INCOME (EXPENSE):
Interest expense (1,258) (529)
Cotton futures transactions 62
Other - net 193 190
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EARNINGS (LOSS) BEFORE INCOME
TAXES (2,367) 728
PROVISIONS (CREDITS) FOR INCOME
TAXES (1,024) 272
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NET EARNINGS (LOSS) $ (1,343) $ 456
========= =========
EARNINGS (LOSS) PER SHARE $ (0.17) $ 0.05
========= =========
AVERAGE SHARES
OUTSTANDING 7,944,201 8,565,429
========= =========
DIVIDENDS DECLARED PER
SHARE $ 0.03 $ 0.03
========= =========
See notes to interim consolidated financial statements.
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FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1996 AND
JULY 2, 1995
(UNAUDITED)
June 30, July 2,
(in thousands) 1996 1995
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OPERATING ACTIVITIES:
Net earnings $ (1,343) $ 456
Adjustments to reconcile net earnings to net
cash provided by (used for) operating activities:
Depreciation and amortization of property, plant
and equipment 2,437 2,112
Amortization of goodwill 143 52
Deferred income taxes 24 (12)
Gain on disposal of property, plant and equipment (112) (74)
Changes in assets and liabilities:
Accounts receivable 14,645 8,209
Inventories (8,950) (10,947)
Other current assets (169) (125)
Other assets (330) (131)
Accounts payable 775 3,573
Income taxes payable 48 (18)
Accrued liabilities 68 (562)
Other liabilities 13 12
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Net Cash Provided by Operating Activities 7,249 2,545
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INVESTING ACTIVITIES:
Capital expenditures (1,647) (6,973)
Acquisitions, net of cash acquired (3,958)
Proceeds from sale of property, plant and
equipment 331 199
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Net Cash Used For Investing Activities (1,316) (10,732)
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FINANCING ACTIVITIES:
Payment of long-term debt (2,500) (2,750)
Increase (decrease) in bank revolving credit (19,000)
Increase in notes payable 15,570 10,595
Exercise of stock options 455
Cash dividends (239) (257)
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Net Cash Provided By (Used For) Financing Activities (6,169) 8,043
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NET DECREASE IN CASH
(carried forward) $ (236) $ (144)
======== =======
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FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1996 AND
JULY 2, 1995
(UNAUDITED)
June 30, July 2,
(dollars in thousands) 1996 1995
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NET DECREASE IN CASH
(brought forward) $ (236) $(144)
CASH, beginning of period 517 567
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CASH, end of period $ 281 $ 423
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Supplemental Cash Flow Information:
Income taxes paid $ 68 $ 141
====== =====
Interest paid net of amounts capitalized $1,220 $ 534
====== =====
See notes to interim consolidated financial statements.
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FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying interim 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 30, 1996 and the results of its operations
and its cash flows for the periods ended June 30, 1996 and July 2, 1995.
Such adjustments include normal recurring accruals and a pro rata portion
of certain estimated annual expenses.
2. The computation of net earnings per share for the periods ended June 30,
1996 and July 2, 1995 is based on simple average shares outstanding.
Stock options outstanding did not have a material dilutive effect during
either period.
3. Major classes of inventory were as follows (in thousands):
June 30, March 31,
1996 1996
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Raw materials $27,899 $23,076
Work in process 4,575 2,916
Finished goods 23,745 21,277
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$56,219 $47,269
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4. Operating results of interim periods are not necessarily indicative of
results to be expected for the year.
5. Certain reclassifications have been made to the July 2, 1995 financial
statements to conform to the June 30, 1996 presentation.
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FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THE THREE MONTHS ENDED JULY 2,
1995
Consolidated net sales increased $5.6 million or 13.2% to $44.4 million in the
current year quarter. The increase was attributable to incremental net sales
of $9.8 million from businesses acquired by the Company subsequent to the end
of the comparable prior year quarter, offset by declines in net sales of
comforters, comforter accessories and throws.
Gross profit as a percentage of net sales declined to 15.6% for the quarter
ended June 30, 1996 from 19.3% for the quarter ended July 2, 1995, primarily
due to underutilization of production capacity at the Company's primary
manufacturing facilities. This underutilization resulted from particularly
weak demand for comforters, comforter accessories and throws during the first
quarter, which is also normally the slowest period of the fiscal year for sales
of these product categories. Capacity utilization has improved with the start
of the second quarter.
Marketing and administrative expenses increased $1.7 million or 25.5% to $8.2
million in the current year quarter. The incremental marketing and
administrative expenses of the businesses acquired subsequent to the end of the
comparable prior year quarter, accounted for $1.5 million of the increase.
Interest costs incurred increased to $1.3 million in the current year quarter
from $0.6 million (including capitalized interest of $114,000) in the prior
year quarter. This increase was due to higher levels of debt outstanding. The
higher debt levels are attributable to fiscal 1996 capital expenditures of
$23.7 million, acquisitions of $20.5 million and purchases of treasury stock of
$7.5 million.
The effective income tax rate increased to 43.3% for the three month period
ended June 30, 1996 from 37.4% for the three month period ended July 2, 1995.
This increase is attributable to an increase of $91,000 in financial statement
expenses for nondeductible amortization of goodwill and higher state and local
income tax rates applicable to acquired companies.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
The Company maintains uncommitted lines of credit totaling $40 million with two
banks at floating interest rates. Total borrowings outstanding under these
lines at June 30, 1996 were $16.8 million. The Company also has unsecured
committed revolving credit agreements totaling $30 million with two banks at
interest rates based on the London Interbank Offered Rate (LIBOR). There were
no outstanding borrowings under these agreements at June 30, 1996.
Total debt outstanding decreased to $69.7 million at June 30, 1996 from $75.6
million at March 31, 1996. The ratio of debt to equity was 0.86:1 at June 30,
1996 compared to 0.91:1 at March 31, 1996. The decrease in total debt was
attributable to a reduction of $14.6 million in accounts receivable partially
offset by additional borrowings to fund an increase in inventories. Despite
the
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reduction in total debt outstanding, working capital decreased to $48.1
million at June 30, 1996 from $67.9 million at March 31, 1996, primarily as the
result of an increase of $15.6 million in notes payable. To take advantage of
lower interest rates, the Company increased the amount borrowed on its
uncommitted lines which are classified as short-term notes payable to repay
amounts outstanding on its committed revolving credit facilities which are
classified as long-term debt.
Total inventories increased $8.9 million to $56.2 million at June 30, 1996 from
$47.3 million at March 31, 1996. This inventory build up is a seasonal pattern
to bring stock to adequate levels to meet the heavier shipping demands in the
second and third quarters of the fiscal year.
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 was effective for the Company beginning April 1, 1996
and had no impact on the Company's financial position as of June 30, 1996, or
results of operations for the three month period then ended.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which was effective for the Company beginning April 1, 1996.
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 will continue to account for stock-based compensation following the
intrinsic value method. 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. The Company will disclose the required pro forma
information in the notes to its financial statements for the year ended March
30, 1997.
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FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
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
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10(d)(iii) Amendment No. 2 to Revolving Credit Agreement dated June 28, 1996
with Wachovia Bank of Georgia, N.A.
10(c)(iii) Amendment No. 2 to Revolving Credit Agreement dated June 28, 1996
with NationsBank, N.A., formerly known as NationsBank, National
Association (Carolinas)
27 Financial Data Schedule (for SEC use only)
There were no reports on Form 8-K during the quarter ended June 30, 1996.
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FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
JUNE 30, 1996
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 13, 1996 /s/ Robert E. Schnelle
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ROBERT E. SCHNELLE
Treasurer
(Chief Accounting Officer)
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