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 July 2, 1995
------------
( ) 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)
(404) 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 11, 1995 was 7,943,980.
---------
FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
PART 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
JULY 2, 1995 (UNAUDITED) AND APRIL 2, 1995
July 2, April 2,
(dollars in thousands) 1995 1995
------------------------------------------------------------------------------------------------------
ASSETS
------
CURRENT ASSETS
Cash $ 423 $ 567
Accounts receivable, net:
Due from factor 14,723 20,657
Other 2,420 4,382
Inventories 55,856 44,909
Deferred income taxes 735 737
Other current assets 2,259 2,152
---------- ----------
Total Current Assets 76,416 73,404
---------- ----------
PROPERTY, PLANT AND EQUIPMENT - at cost:
Land, buildings and improvements 32,899 32,060
Construction projects in progress 7,847 666
Machinery and equipment 55,533 54,584
Furniture and fixtures 1,951 1,735
---------- ----------
98,230 89,045
Less accumulated depreciation 31,252 29,583
---------- ----------
Property, Plant and Equipment - net 66,978 59,462
---------- ----------
OTHER ASSETS 4,291 1,165
---------- ----------
TOTAL $ 147,685 $ 134,031
========== ==========
See notes to interim consolidated financial statements.
-1-
FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS (continued)
CONSOLIDATED BALANCE SHEETS
JULY 2, 1995 (UNAUDITED) AND APRIL 2, 1995
July 2, April 2,
(dollars in thousands) 1995 1995
------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 25,665 $ 15,070
Accounts payable 14,249 10,666
Income taxes payable 908 687
Accrued liabilities 4,526 5,026
Current maturities of long-term debt 5,502 5,000
---------- ---------
Total Current Liabilities 50,850 36,449
---------- ---------
LONG-TERM DEBT 3,312 5,000
---------- ---------
DEFERRED INCOME TAXES 5,208 4,933
---------- ---------
OTHER LIABILITIES 661 649
---------- ---------
SHAREHOLDERS' EQUITY:
Common stock - par value $1.00 per share;
15,000,000 shares authorized; 9,044,507 and
9,003,991 shares issued 9,045 9,004
Paid-in capital 34,299 33,811
Retained earnings 51,551 51,352
Less:
468,448 and 464,188 shares of common
stock held in treasury (7,241) (7,167)
---------- --------
Total Shareholders' Equity 87,654 87,000
---------- ---------
TOTAL $ 147,685 $ 134,031
========== =========
See notes to interim consolidated financial statements.
-2-
FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS (Continued)
CONSOLIDATED STATEMENTS OF EARNINGS
JULY 2, 1995 AND JULY 3, 1994
(UNAUDITED)
(dollars in thousands, except
per share data) July 2, July 3,
1995 1994
-----------------------------------------------------------------------------------------------------
NET SALES $ 39,207 $ 39,713
COST OF PRODUCTS SOLD 31,656 32,087
------------ ------------
GROSS PROFIT 7,551 7,626
MARKETING AND
ADMINISTRATIVE EXPENSES 6,494 5,405
------------ ------------
EARNINGS FROM OPERATIONS 1,057 2,221
OTHER INCOME (EXPENSE):
Interest Expense (529) (363)
Other - net 200 106
------------ ------------
EARNINGS BEFORE INCOME TAXES 728 1,964
PROVISIONS FOR INCOME TAXES 272 721
------------ ------------
NET EARNINGS $ 456 $ 1,243
============ ============
NET EARNINGS PER SHARE $ 0.05 $ 0.15
============ ============
AVERAGE SHARES OUTSTANDING 8,565,429 8,421,569
============ ============
DIVIDENDS DECLARED PER SHARE $ 0.03 $ 0.03
============ ============
See notes to interim consolidated financial statements.
-3-
FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JULY 2, 1995 AND
JULY 3, 1994
(UNAUDITED)
July 2, July 3,
(dollars in thousands) 1995 1994
--------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net Earnings $ 456 $ 1,243
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 2,112 1,757
Deferred income taxes 2
Gain on disposal of property, plant and equipment (74) (4)
Changes in assets and liabilities:
Accounts receivable 8,209 6,912
Inventories (10,947) (5,719)
Other current assets (87) (121)
Other assets (131) (198)
Accounts payable 3,573 (1,512)
Income taxes payable (18) 559
Accrued liabilities (562) (451)
Other liabilities 12 12
---------- ---------
Net Cash Provided by Operating Activities 2,545 2,478
---------- ---------
INVESTING ACTIVITIES:
Capital expenditures (6,973) (6,915)
Acquisition, net of cash acquired (3,958)
Proceeds from sale of property, plant and
equipment 199 4
---------- ---------
Net Cash Used for Investing Activities (10,732) (6,911)
---------- ---------
FINANCING ACTIVITIES:
Payment of long-term debt (2,750) (2,500)
Increase in notes payable 10,595 7,146
Exercise of stock options 455 71
Cash dividends (257) (253)
---------- ---------
Net Cash Provided By Financing Activities 8,043 4,464
---------- ---------
NET INCREASE (DECREASE) IN CASH
(carried forward) $ (144) $ 31
-4-
FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JULY 2, 1995 AND
JULY 3, 1994
(UNAUDITED)
July 2, July 3,
(dollars in thousands) 1995 1994
---------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH
(brought forward) $ (144) $ 31
CASH, beginning of period 567 425
------- -------
CASH, end of period $ 423 $ 456
======= =======
Supplemental Cash Flow Information:
Income taxes paid $ 141 $ 357
======= =======
Interest paid net of amounts capitalized $ 534 $ 442
======= =======
See notes to interim consolidated financial statements.
-5-
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 July 2, 1995 and the results of its operations and its cash
flows for the periods ended July 2, 1995 and July 3, 1994. Such
adjustments include normal recurring accruals and a pro rata portion of
certain estimated annual expenses.
2. Interest costs of $114,000 and $67,000 were capitalized during the three
month periods ended July 2, 1995 and July 3, 1994.
3. The computation of net earnings per share for the periods ended July 2,
1995 and July 3, 1994 is based on the simple average shares outstanding.
Stock options outstanding did not have a dilutive effect during either
period.
4. Major classes of inventory were as follows (in thousands):
July 2, April 2,
1995 1995
---- ----
Raw materials $ 28,393 $ 24,846
Work in process 7,109 2,831
Finished goods 20,354 17,232
--------- ---------
$ 55,856 $ 44,909
========= =========
5. Operating results of interim periods are not necessarily indicative of
results to be expected for the year.
-6-
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 July 2, 1995 compared with three months ended July 3, 1994.
Net sales by major product category were as follows during the three months
ended:
July July
2, 1995 3, 1994
--------- ---------
Comforters and accessories $ 21,632 $ 24,987
Jacquard-woven cotton products 15,529 13,016
Other 2,046 1,710
--------- ---------
Total net sales $ 39,207 $ 39,713
========= =========
Consolidated net sales declined 1.3% for the quarter ended July 2, 1995
compared to the prior year quarter.
Net sales of comforters and accessories were down 13.4% from the prior year
quarter. Consumer spending in this category weakened during the quarter
causing retailers to begin tightening their inventory positions thereby
reducing orders for the Company's products. Also, chronically late shipments,
especially during the last six months of fiscal 1995, by the Company's fabric
supplier for the popular Royal Sateen luxury product line prevented the Company
from meeting its customers' needs for luxury bedding products. The supplier
reports that the manufacturing problems which caused these late shipments have
been resolved. Although fabric supplies are now being received at normal
levels, it has taken additional time and considerable effort to reestablish the
momentum in the franchise with many large customers. This effort continues at
this date.
Net sales of jacquard-woven cotton products increased 19.3% in the current year
quarter primarily due to increased unit sales of cotton throws and matelasse
bedspreads. This product category includes cotton throws, bedspreads, blankets
and rugs. The Company believes that sales in this product category would have
increased even more if not for the weakness in consumer spending and retailer
inventory reduction programs described in the preceding paragraph.
The Company expects sales activity to improve during the historically stronger
autumn and winter seasons, but not to levels previously anticipated. Sales
growth should also accelerate once retailers have completed paring down their
inventories, a process anticipated to take several more months. If current
market conditions prevail, the Company expects sales to increase for the full
1996 fiscal year, but it would be difficult to meet the earnings level achieved
in fiscal 1995.
-7-
The Company expects a long-term world-wide trend of increased demand for
jacquard-woven cotton products. To meet this demand the Company is nearing
completion on capital projects which will triple production capacity for
matelasse bedspreads and increase cotton throw capacity by over forty percent.
These capital projects include a new 90,000 square foot weaving plant in
Dalton, Georgia which will house 33 state-of-the-art air-jet looms and seven
12-color looms. Also included in these projects is an expansion of the
warehouse and distribution center in Calhoun, Georgia.
In addition to these capital projects, during April 1995 the Company acquired
all of the stock of Textile, Inc., a contract manufacturer of jacquard-woven
cotton products located in Ronda, North Carolina. This acquisition provided
the Company with immediate access to weaving capacity to meet the growing
demand for cotton throws.
Marketing and administrative expenses increased $1,089,000 or 20.1% in the
current year quarter in large part due to the Company's continued efforts to
strengthen its management team to pursue acquisitions and other expansion
opportunities which offer significant potential for profitable growth. The
Company is taking steps to reduce expenses without adversely affecting its
ability to pursue its growth objectives.
Interest expense is net of capitalized interest of $114,000 and $67,000 during
the quarters ended July 2, 1995 and July 3, 1994, respectively. Excluding the
effect of interest capitalized, interest expense increased 49.5% in the current
year quarter. The increase was due to higher levels of average total debt
outstanding and higher short-term interest rates.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased to $25.6 million at July 2, 1995 from $37.0 million
at April 2, 1995 as the Company utilized funds of $7.0 million for capital
expenditures and $4.0 million for the acquisition of Textile, Inc. The Company
also repaid $2.8 million of long-term debt. The funding for these expenditures
was provided mainly through increased borrowings under the Company's short-term
credit lines. The ratio of debt to equity was 0.4:1 at July 2, 1995, and 0.3:1
at April 2, 1995.
Inventories increased to $55.9 million at July 2, 1995 from $44.9 million at
April 2, 1995. This increase was partly attributable to producing inventory
based on anticipated customer order levels that were higher than the actual
order volume received, and a normal inventory build up during the first quarter
to bring stock to adequate levels to meet the heavier shipping demands in the
second and third quarters of the fiscal year.
The Company presently has short-term lines of credit with two banks aggregating
$50 million which are used as needed. The borrowings outstanding under these
lines at July 2, 1995 were $25.7 million.
On July 12, 1995, the Company's Board of Directors authorized a program for the
repurchase of up to 1,000,000 shares of its common stock.
The Company is presently negotiating long-term debt agreements to provide
funding for acquisitions, capital expenditures and stock repurchases. A
portion of the Company's short-term borrowings will also be converted to
long-term debt.
-8-
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
Ex-27- Financial Data Schedule (for SEC purposes only)
-9-
FORM 10-Q
CROWN CRAFTS, INC. AND SUBSIDIARIES
JULY 2, 1995
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, 1995 /s/ Robert E. Schnelle
--------------- -------------------------------------------
ROBERT E. SCHNELLE
Treasurer
(Chief Accounting Officer)
-10-