Note 12 – Commitments and Contingencies

Total rent expense was $1.6 million and $1.7 million during fiscal years 2013 and 2012, respectively. The Company’s commitment for minimum guaranteed rental payments under its lease agreements as of March 31, 2013 is $2.0 million, consisting of $1.5 million, $430,000 and $48,000 due in fiscal years 2014, 2015 and 2016, respectively.

Total royalty expense was $6.8 million and $6.9 million for fiscal years 2013 and 2012, respectively. The Company’s commitment for minimum guaranteed royalty payments under its license agreements as of March 31, 2013 is $5.3 million, consisting of $2.9 million, $1.5 million and $875,000 due in fiscal years 2014, 2015 and 2016, respectively.

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, alleging that CCIP’s mesh crib liner infringes BreathableBaby’s patent rights relating to its air permeable infant bedding technology. The Company believes that it has meritorious defenses to the claims asserted in the complaint, and the Company intends to defend itself vigorously against all such claims. The Company and CCIP filed a motion for summary judgment of non-infringement on May 14, 2012. On July 25, 2012, the Court entered an order denying that motion without prejudice to refiling it at the close of discovery. In doing so, the Court did not rule on the merits of the Company’s motion, but instead determined that further discovery was required before a motion for summary judgment could be decided. Discovery accordingly was resumed and remained ongoing as of March 31, 2013.

The Company’s policy is to capitalize legal and other costs incurred in the defense of the Company’s patents when it is believed that the future economic benefit of the patent will be maintained or increased and a successful defense is probable. In this regard, as of March 31, 2013, the Company capitalized legal and other costs in the amount of $1.0 million associated with its defense of the BreathableBaby complaint into the intangible asset related to its own patent application for CCIP’s mesh crib liner. Upon a favorable conclusion of the BreathableBaby litigation, the Company’s capitalized costs associated with CCIP’s mesh crib liner will be amortized over the expected life of the resulting patent, to the extent that an economic benefit is anticipated from the patent or alternative future use is available to the Company. A different conclusion or outcome of the Breathablebaby litigation could result in a material impairment charge up to the carrying value of CCIP’s mesh crib liner.

On March 27, 2013, an alleged California purchaser of a CCIP bedding set filed a complaint against the Company and CCIP in the Superior Court for the County of Riverside, California, purportedly on behalf of herself and similarly situated California consumers. The complaint generally alleges that CCIP’s crib bumper products put children at risk of suffocation or crib death and that the Company and CCIP concealed and failed to disclose these purported risks through allegedly false and misleading advertising and product packaging. The complaint does not allege that any child has actually been harmed by these products. The complaint alleges violations of various consumer protection laws in California. The purported class is defined in the complaint as “All California consumers who, within the applicable statute of limitations, purchased a Crown Craft [sic] crib bumper, either alone or as part of a bedding set.” The complaint seeks damages for the purported class in an unspecified amount, injunctive relief, restitution and disgorgement of all monies acquired by the Company and CCIP by means of any act or practice the Court finds to be unlawful, a Court-ordered corrective advertising campaign, and an award of plaintiffs’ attorneys fees and costs. On April 29, 2013, the Company and CCIP removed the case to the United States District Court for the Central District of California. The Company believes that it has meritorious defenses to the claims asserted in the complaint, and the Company intends to defend itself vigorously against all such claims.

In addition to the foregoing civil complaints, the Company is, from time to time, 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 position, results of operations or cash flows.