Crown Crafts, Inc. Reports Results for Third Quarter of Fiscal Year 2009

- $9.0 million non-cash goodwill impairment charge leads to third quarter loss of $8.2 million

- Year-to-date EBITDA (exclusive of impairment charge) increases 16% to $6.3 million

- Year-to-date cash flow from operations increases by $6.2 million to $9.1 million

- Revised full-year revenue and earnings guidance issued

GONZALES, La., Feb. 11 /PRNewswire-FirstCall/ -- Crown Crafts, Inc. (the "Company") (Nasdaq: CRWS) today reported a net loss (after recording a substantial goodwill impairment charge) for the third quarter of fiscal year 2009 and revised the Company's revenue and earnings guidance for fiscal year 2009.

Historical Results

The Company's net loss for the third quarter of fiscal year 2009 was $8.2 million, or $0.88 per diluted share, on net sales of $19.3 million, compared to net income for the third quarter of fiscal year 2008 of $1.2 million, or $0.12 per diluted share, on net sales of $18.4 million. The net loss for the third quarter of fiscal year 2009 included a non-cash pre-tax charge of $9.0 million for an estimate of a probable impairment to goodwill. Excluding the goodwill impairment charge, the Company would have reported net income of $822,000, or $0.09 per diluted share, in the third quarter. The impairment charge did not result in any cash expenditures and did not affect the Company's cash position, cash flows from operating activities or availability under its credit facility.

An interim goodwill impairment test was triggered during the quarter as a result of the decline in the market capitalization of the Company. The Company has completed step one of its impairment test but was unable to complete step two before filing its Form 10-Q for the third quarter of fiscal year 2009. Based on the analysis completed to date, the Company estimates a range of probable impairment loss of $6.0 million to $12.0 million. The $9.0 million charge recognized in the quarter represents the Company's best estimate of the probable impairment at this time. The Company will adjust the charge, if necessary, after completing step two of its impairment test in connection with its next periodic report filing with the Securities and Exchange Commission.

Gross profit for the quarter of $3.8 million has decreased as compared to $4.6 million reported in fiscal year 2008 primarily as a result of amortization associated with the Springs Global acquisition, the costs of establishing a Foreign Representative Office in China and increased product costs from Asia. The Company tightly managed its marketing and administrative expenses and was able to lower those expenses during the current year quarter. Cash flow from operations in the year-to-date period of fiscal 2009 was $9.1 million, an increase of $6.2 million compared to the year-to-date period of fiscal 2008.

"We are pleased to report increased sales despite the difficult economic environment. The increase resulting from the acquisition of the baby products line of Springs Global in the third quarter of fiscal year 2008 was partially offset by lower replenishment orders and discontinued programs," commented E. Randall Chestnut, Chairman, President and Chief Executive Officer of the Company. "Although we regret the need to record such a sizeable charge to our goodwill, we are convinced that our business model, our focus on cost controls and our strong cash position will keep us in an excellent competitive position to manage through this economic downturn and subsequently benefit from its recovery. Notably, year-to-date EBITDA (earnings before interest, taxes, depreciation and amortization) for the current year was $6.3 million, up from $5.5 million in the prior year, and we continue to generate strong cash flow," Mr. Chestnut continued.

FY 2009 Guidance

The current economic environment has led the Company's customers to delay shipments. As a result, the Company revised its 2009 revenue, EBITDA and EPS guidance. The Company expects net revenues for fiscal year 2009, which ends March 29, 2009, to be in the range of $84.0 million to $87.0 million. In addition, the Company expects EBITDA for fiscal year 2009 to be in the range of $9.3 million, or 11.1% of net revenues, to $9.9 million, or 11.4% of net revenues, and diluted earnings per share, excluding the effect of the $9.0 million impairment charge, to be in the range of $0.40 to $0.44.

Conference Call

The Company will host a teleconference today at 1:00 p.m. Central Standard Time to discuss the Company's results and answer appropriate questions. Interested individuals may join the teleconference by dialing (800) 230-1093. Please refer to confirmation number 982534. The teleconference can also be accessed in listen-only mode by visiting the Company's website at The financial information to be discussed during the teleconference may be accessed prior to the call on the investor relations portion of the Company's website.

A telephone replay of the teleconference will be available from 2:30 p.m. Central Standard Time on February 11, 2009 through 11:59 p.m. Central Standard Time on February 18, 2009. To access the replay, dial (800) 475-6701 in the United States or (320) 365-3844 from international locations. The access code for the replay is 982534.

About Crown Crafts, Inc.

Crown Crafts, Inc. designs, markets and distributes infant, toddler and juvenile consumer products, including bedding, blankets, bibs, bath items and accessories. Its operating subsidiaries include Hamco, Inc. in Louisiana and Crown Crafts Infant Products, Inc. in California. Crown Crafts is America's largest distributor of infant bedding, bibs and bath items. The Company's products include licensed and branded collections as well as exclusive private label programs for certain of its customers.

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. 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 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 suggested by the forward-looking statements. These risks include, among others, general economic conditions, including changes in interest rates, in the overall level of consumer spending and in the price of oil, cotton and other raw materials used in the Company's products, changing competition, changes in the retail environment, the level and pricing of future orders from the Company's customers, the extent to which the Company's business is concentrated in a small number of customers, the Company's dependence upon third-party suppliers, including some located in foreign countries, customer acceptance of both new designs and newly-introduced product lines, actions of competitors that may impact the Company's business, disruptions to transportation systems or shipping lanes used by the Company or its suppliers, and the Company's dependence upon licenses from third parties. Reference is also made to the Company's periodic filings with the Securities and Exchange Commission for additional factors that may impact the Company's results of operations and financial condition. The Company does not undertake to update the forward- looking statements contained herein to conform to actual results or changes in our expectations, whether as a result of new information, future events or otherwise.

                           SELECTED FINANCIAL DATA
             In thousands, except per share data and percentages

                            Three Months Ended          Nine Months Ended

                          December 28, December 30,  December 28, December 30,
                              2008         2007          2008         2007
    Net sales               $19,316      $18,431       $62,830      $50,902
    Gross profit              3,797        4,578        12,890       12,847
    Gross profit percentage    19.7%        24.8%         20.5%        25.2%
    Goodwill impairment
     charge                   9,000            -         9,000            -

    (Loss) income from
     operations              (7,420)       1,994        (4,206)       4,887
    (Loss) income before
     income taxes            (7,648)       1,928        (5,019)       4,566
    Income tax expense          526          692         1,532        1,705
    (Loss) income from
     continuing operations
     after income taxes      (8,174)       1,236        (6,551)       2,861
    (Loss) income from
     operations - net of
     income taxes                (4)         (12)           27         (110)
    Net (loss) income        (8,178)       1,224        (6,524)       2,751
    Basic (loss) income
     per share               $(0.88)       $0.12        $(0.70)       $0.28
    Diluted (loss) income
     per share               $(0.88)       $0.12        $(0.70)       $0.27

    Weighted Average Shares
      Basic                   9,265        9,903         9,353        9,966
      Diluted                 9,265       10,176         9,353       10,248

                         CONSOLIDATED BALANCE SHEETS
                           SELECTED FINANCIAL DATA
                                 In thousands

                                                     December 28,   March 30,
                                                         2008         2008
    Cash and cash equivalents                           12,214        7,930
    Accounts receivable, net of allowances              14,476       18,278
    Inventories                                         14,729       13,777
    Total current assets                                43,942       42,597
    Goodwill                                            13,884       22,884
    Intangible assets, net                               5,931        7,276
    Total assets                                        64,506       73,477

    Current maturities of long-term debt                 2,292        2,504
    Total current liabilities                           12,830       11,031
    Long-term debt                                      18,891       22,311
    Total non-current liabilities                       18,891       22,713

    Shareholders' equity                                32,785       39,733
    Total liabilities and shareholders' equity          64,506       73,477

                       In thousands, except percentages

                             Three Months Ended          Nine Months Ended

                          December 28,  December 30, December 28, December 30,
                              2008          2007         2008         2007
    Net income              $(8,178)      $1,224       $(6,524)      $2,751
    Interest expense            265          244           900          475
    Interest income             (35)         (10)         (123)         (11)
    Taxes on continuing
     operations                 526          692         1,532        1,705
    Taxes on discontinued
     operations                  (2)          (4)           15          (55)
    Depreciation                 64           88           225          259
    Goodwill impairment
     charge                   9,000            -         9,000            -
    Amortization                434          303         1,311          340
      EBITDA                  2,074        2,537         6,336        5,464

    Net Sales
    Net sales from
     continuing operations   19,316       18,431        62,830       50,902
    Net sales from
     discontinued operations      -            -             -           52
      Net sales              19,316       18,431        62,830       50,954

      EBITDA as a percentage
       of net sales            10.7%        13.8%         10.1%        10.7%

                      PROJECTED FISCAL YEAR 2009 EBITDA
                                 In thousands

                                                     Low End         High End
                                                     of Range        of Range
    Net income, excluding $9.0 million non-cash
     pre-tax goodwill impairment charge               $3,800         $4,200
    Interest                                           1,000          1,000
    Taxes                                              2,500          2,700
    Depreciation                                         300            300
    Amortization                                       1,700          1,700
    EBITDA                                            $9,300         $9,900

The Company uses EBITDA as an internal measure to monitor the Company's operating and cash flow performance and to evaluate the performance of its businesses. The Company believes that the presentation of EBITDA provides useful information to investors and is an important indicator of the Company's ability to generate cash sufficient to reduce debt, make strategic investments, meet capital expenditures and working capital requirements and otherwise meet its obligations as they become due. EBITDA is not considered a measure of financial performance under U.S. generally accepted accounting principles (GAAP), and the items excluded from EBITDA are significant components in understanding and assessing the Company's financial performance. EBITDA is provided as supplemental information and should be considered in addition to, and not as a substitute for, such GAAP measures as net income, cash flow provided by or used in operating, investing or financing activities, and other measures of financial performance and liquidity reported in accordance with GAAP. Because EBITDA is not a measure determined in accordance with GAAP, companies are free to calculate it in varying ways. Therefore, EBITDA, as presented by the Company, will not necessarily be comparable to similarly titled measures of other companies.

SOURCE Crown Crafts, Inc.