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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 1, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES ACT OF 1934
COMMISSION FILE NO. 1-7604
CROWN CRAFTS, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-0678148
(State of Incorporation) (I.R.S. Employer Identification No.)
1600 RIVEREDGE PARKWAY, 30328
SUITE 200 (Zip Code)
ATLANTA, GEORGIA
(Address of principal executive offices)
Registrant's Telephone Number, including area code: (770) 644-6400
Securities registered pursuant to Section 12(b) of the Act:
Title of class Name of exchange on which registered
COMMON STOCK, $1.00 PAR VALUE NASDAQ OTC BULLETIN BOARD
COMMON SHARE PURCHASE RIGHTS NASDAQ OTC BULLETIN BOARD
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 [ ] No [X].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes [ ] No [X]
As of August 14, 2001, 9,421,437 shares of Common Stock were
outstanding, and the aggregate market value of the Common Stock (based upon the
closing price of these shares on that date) held by persons other than Officers,
Directors, the Company's Employee Stock Ownership Plan, and 5% shareholders was
approximately $3,318,049.
DOCUMENTS INCORPORATED BY REFERENCE:
Crown Crafts, Inc., Proxy Statement in connection with its Annual
Meeting of Shareholders on November 27, 2001 (Part III).
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PART I
ITEM 1. BUSINESS
Crown Crafts, Inc., a Georgia corporation founded in 1957, operates,
both directly and indirectly through its subsidiaries, in two principal business
segments within the textile industry: 1) Adult Home Furnishing and Juvenile
Products, and 2) Infant Products. Adult Home Furnishing and Juvenile Products
consists of Bedroom and Bath Products (adult sheets, comforters and towels),
Throws and Juvenile Products (primarily Pillow Buddies(R)). The Infant Products
segment consists of infant bedding, bibs, infant soft goods and accessories.
Sales are generally made directly to retailers, primarily department and
specialty stores, mass merchants, large chain stores and gift stores. These
products are marketed under a variety of Company-owned trademarks, under
trademarks licensed from others, without trademarks as unbranded merchandise and
with customers' private labels.
In response to changing business conditions in the textile industry,
the Company made significant changes in its business operations over the last
eighteen months. In addition to a program of cost reductions and
rationalization, the Company outsourced virtually all of its manufacturing to
domestic and foreign contract manufacturers with the exception of the specialty
hand wovens at Churchill Weavers and screen-printed infant bibs produced by
Burgundy in Mexico. The Woven Products division, with manufacturing primarily in
north Georgia, was sold on November 14, 2000 and proceeds of $32.3 million were
used to reduce debt. Following the outsourcing of adult bedding, the Roxboro,
North Carolina plant was sold on June 14, 2001 and the proceeds of $8.0 million
were used to reduce debt. Also, the Company made a decision to exit the Adult
Bedding and Bath Business and the net assets of $13.7 million were held for sale
at April 1, 2001; the sale was completed on July 23, 2001. Following the sale of
the Adult Bedding and Bath business as of July 23, 2001, the Company will be
primarily in the infant and juvenile products business, but in describing the
results of operations for fiscal 2001 reference is made to all of the product
groups. Because of the sale of assets and the refinancing that occurred July 23,
2001, the historical results are not indicative of the Company's future
operations.
PRODUCTS
The Company's products fall into three groups: 1) bedroom and bath
products, 2) throws and 3) infant and juvenile products.
The Company's bedroom products include comforters, comforter sets,
sheets, pillowcases, sheet sets, pillow shams, bed skirts, duvets, decorative
pillows, coverlets and jacquard-woven bedspreads. These products are made from a
variety of natural and man-made fibers. The bath products are primarily towels
with some shower curtains and decorative bath products.
The Company offers its bedroom and bath products in a wide variety of
styles and patterns, from comforters to woven bedspreads and from solid colors
to designer prints. The Company believes the trend toward coordination of the
bedroom will remain strong and expects to continue its emphasis on comforters
and duvets with coordinated sheets and accessories. During the fiscal year ended
March 28, 1999, the Company began manufacturing and selling bedroom and bath
products under the Calvin Klein trademark under a license agreement with Calvin
Klein, Inc.
Throws are manufactured and imported in a variety of colors, designs
and fabrics, including cotton, acrylic, cotton/acrylic blends, rayon, wool,
fleece and chenille.
Infant products include crib bedding, diaper stackers, mobiles, bibs,
receiving blankets, burp cloths, bathing accessories and other infant soft goods
and accessories.
During the fiscal years ended April 1, 2001, April 2, 2000 and March
28, 1999, bedroom and bath products represented 37%, 43% and 40% of consolidated
net sales; throws represented 22%, 22% and 27% of consolidated net sales; and
infant and juvenile products represented 41%, 35% and 33%, respectively, of
consolidated net sales.
PRODUCT DESIGN AND STYLING
The Company's research and development expenditures focus primarily on
product design and styling. The Company believes styling and design are key
components to its success. The Company's designs include traditional,
contemporary, textured and whimsical patterns. The Company designs and
manufactures products across a broad spectrum of retail price points and is
continually developing new designs for all of its product groups.
1
The Company's designers and stylists work closely with the marketing
staff and licensors to develop new designs. The Company develops internally and
obtains designs from numerous sources, including graphic artists, decorative
fabric manufacturers, apparel designers, its employees and museums. The Company
utilizes computer aided design systems to increase its design flexibility and
reduce costs. In addition, these systems significantly shorten the time for
responding to customer demands and changing market trends. The Company also
creates designs for exclusive sale by certain of its customers.
SALES AND MARKETING, CUSTOMERS
The Company markets its products through a national sales force
consisting of salaried sales executives and employees and independent
commissioned sales representatives. Independent representatives are used most
significantly in sales to the gift trade and to the infant markets. Sales
outside the United States are made primarily through distributors.
The Company's customers consist principally of department stores, chain
stores, mass merchants, specialty home furnishings stores, wholesale clubs, gift
stores and catalogue and direct mail houses. The table below indicates customers
representing more than 10% of sales.
Fiscal Year:
2001 2000 1999
Wal-Mart Stores, Inc. 16% 13% 18%
Federated Department Stores 14% 14% *
Toys R Us 13% 11% *
Target Corporation * 11% *
*-Less than 10%.
In June 1998, Wal-Mart informed the Company that, effective February 1,
1999, it would discontinue the Company's "Signature Series" line of bedding and
accessories. Sales of all products in this line represented 9% of the Company's
net sales in the fiscal year ended March 29, 1998. Because Wal-Mart continued to
purchase these products from the Company during most of the fiscal year ended
March 28, 1999, the full impact on net sales of this decision was not felt until
the fiscal year that ended April 2, 2000.
The Company's sales offices are located in Atlanta, Georgia; Huntington
Beach, California; Rogers, Arkansas and New York City, New York. There is also a
showroom at the Calvin Klein building in New York City.
The Company sells substantially all of its products to retailers for
resale to consumers. The Company generally introduces new products to the retail
trade during the industry's April and October home textile markets. Substantial
shipments of successful new designs generally occur at least six months after
the product introduction as more conservative buyers follow the lead of market
innovators. New product introductions for the gift trade are concentrated in
January through March and June through August when Churchill Weavers
participates in numerous local and regional gift shows. The Company's infant
product subsidiaries generally introduce new products once each year during the
annual Juvenile Products Manufacturers' Association trade shows in October.
Private label products manufactured by the Company are introduced throughout the
year.
The Company uses visually appealing and informative packaging,
point-of-sale displays and advertising materials for retailers. The Company also
regularly advertises its products in publications directed to the trade.
The Company also markets primarily close-out and irregular products
through its own retail "outlet" stores located in Calhoun, Georgia, Roxboro,
North Carolina, Berea, Kentucky and Rancho Santa Margarita, California. In
fiscal 2001, approximately 1.5% of the Company's sales were made through its
outlet stores. During fiscal 2001, the stores in Calhoun and Rancho Santa
Margarita were closed. The Roxboro store was sold on July 17, 2001.
MANUFACTURING
The Company produces a limited range of bedding accessories at its
owned facility in Roxboro, North Carolina but the majority of adult bedding
products are now outsourced to domestic and foreign contract manufacturers. The
products are warehoused and shipped from facilities in Roxboro and Timberlake,
North Carolina. These facilities were sold effective July 23, 2001.
The Company's infant products are produced primarily by domestic and
foreign contract manufacturers. These products are then warehoused and shipped
from facilities in Compton, California and Gonzales, Louisiana.
2
RAW MATERIALS
The principal raw materials used in the manufacture of adult and infant
comforters, sheets and accessories are printed and solid color cotton and
polycotton fabrics, and polyester fibers used as filling material. The principal
raw materials used in the manufacture of jacquard-woven bedspreads, throws and
other products are natural-color and pre-dyed 100% cotton yarns and acrylic
yarns. The principal raw materials used in the production of infant bibs are
knit-terry polycotton, woven polycotton and vinyl fabrics. Although the Company
usually maintains supply relationships with only a limited number of suppliers,
the Company believes these raw materials presently are available from several
sources in quantities sufficient to meet the Company's requirements.
The Company uses significant quantities of cotton, either in the form
of cotton fabric or polycotton fabric. Cotton is subject to ongoing price
fluctuations. The price fluctuations are a result of cotton being an
agricultural product subject to weather patterns, disease and other factors as
well as supply and demand considerations, both domestically and internationally.
Significant increases in the price of cotton could adversely affect the
Company's operations.
SEASONALITY, INVENTORY MANAGEMENT
Historically, the Company has experienced a seasonal sales pattern in
which sales are lowest in the first fiscal quarter and peak in the third fiscal
quarter.
The Company carries normal inventory levels to meet delivery
requirements of customers. Customer returns of merchandise shipped are
approximately 1.7% of net sales.
ORDER BACKLOG
The Company's backlog of unfilled customer orders believed by
management to be firm were $10.3 million and $40.1 million at July 30, 2001 and
July 28, 2000, respectively. The decrease resulted from the sale of the Woven
Products division on November 14, 2000, the phase out of most of the Studio
bedding line during fiscal 2001, and the sale of the Adult Bedding and Bath
business effective July 23, 2001. The majority of these unfilled orders are
shipped within approximately eight weeks, and none is expected to be shipped
beyond the completion of the current fiscal year ending March 31, 2002. Due to
the prevalence of quick-ship programs adopted by its customers, the Company does
not believe that its backlogs are a meaningful indicator of future business.
TRADEMARKS, COPYRIGHTS AND PATENTS
The Company's products are marketed in part under well-known
trademarks. The Company considers its trademarks to be of material importance to
its business. Adult bedding primarily carry the trademarks Calvin Klein(R) and
Royal Sateen(R). Infant products carry the trademarks Red Calliope(R), Little
Bedding(R), NoJo(R), Hamco(R) and Pinky Baby(R). Protection for these marks is
obtained through domestic and foreign registrations. The trademark Royal
Sateen(R) was developed in a joint effort with Kitan Textile Industries Ltd. of
Israel. Kitan is the registered owner of the mark, and the Company is the
exclusive marketer of Royal Sateen products in North America.
Certain products are manufactured and sold pursuant to licensing
agreements for trademarks that include, among others: Calvin Klein(R),
Disney(R), and Warner Bros.(R). The licensing agreements for the Company's
designer brands generally are for an initial term of one to five years, and may
or may not be subject to renewal or extension. Sales of product under the
Company's licenses with Calvin Klein, Inc. and Disney Enterprises, Inc.
accounted for 17% and 12%, respectively, of the Company's total sales volume
during fiscal 2001.
Many of the designs used by the Company are copyrighted by other
parties, including trademark licensors, and are available to the Company through
copyright licenses. Other designs are the subject of copyrights and design
patents owned by the Company.
During the fiscal year ended March 28, 1999, the Company entered into
licensing agreements with Calvin Klein, Inc. and Disney Enterprises, Inc. The
Calvin Klein license grants the Company the right to produce and sell bedroom
and bath products under the Calvin Klein brand. The Disney license expands the
Company's right to produce and sell products featuring Disney characters. The
current Disney license expires December 31, 2001 but the Company expects to
secure an extension. The Calvin Klein license expires December 31, 2003 but will
be automatically extended based upon sales volumes which the Company expects to
meet. Following the sale of the Adult Bedding and Bath Business effective July
23, 2001, the Company no longer has a Calvin Klein license.
3
The Company's aggregate commitment for minimum guaranteed royalty
payments under all of its license agreements is $7.8 million, $4.0 million, $3.0
million, $0 for fiscal 2002, 2003, 2004, 2005 and thereafter, respectively. The
Company believes that future sales of royalty products will exceed amounts
required to cover the minimum royalty guarantees. The Company's total royalty
expense, net of royalty income, was $14.4 million, $15.8 million, and $13.4
million for fiscal 2001, 2000, and 1999, respectively.
COMPETITION
The textile industry, including the market for home furnishings
products, is highly competitive. The Company competes with a variety of
manufacturers, many of which are vertically integrated textile companies with
substantially greater resources than the Company, and many of which are of
similar size to the Company. Competitors may have customer relationships that
may be superior to those of the Company and may have substantially greater
resources. The Company believes that it is the largest producer of infant bed
coverings and bibs, enjoying approximately one-third of these segments. The
Company's share of the adult bed covering market is less than 5%.
The Company competes on the basis of quality, design, price, service
and packaging. The Company's products face significant competition from imports.
The availability of imports at low prices has increased importing at the expense
of the domestic textile industry and this trend will continue. The Company
believes that its ability to implement future price increases for its products
may be limited by current or future overcapacity in the domestic textile
industry.
GOVERNMENT REGULATION; ENVIRONMENTAL CONTROL
The Company is subject to various federal, state and local
environmental laws and regulations which regulate, among other things, the
discharge, storage, handling and disposal of a variety of substances and wastes.
The Company's operations are also governed by laws and regulations relating to
employee safety and health, principally the Occupational Safety and Health
Administration Act and regulations thereunder.
The Company believes that it currently complies in all material
respects with applicable environmental, health and safety laws and regulations.
Although the Company believes that future compliance with such existing laws or
regulations will not have a material adverse effect on its capital expenditures,
earnings or competitive position, there can be no assurances that such
requirements will not become more stringent in the future or that the Company
will not incur significant costs in the future to comply with such requirements.
EMPLOYEES
At July 23, 2001, the Company had approximately 520 employees. None of
the Company's U. S. employees is represented by a labor union, and the Company
considers its relationship with its employees to be fair. The Company's 220
employees in Mexico are represented by a labor union. The Company attracts and
maintains qualified personnel by paying competitive salaries and benefits and
offering opportunities for advancement.
INTERNATIONAL SALES
Sales to customers in foreign countries other than the United States
are not currently material to the Company's business.
ITEM 2. PROPERTIES
The Company's headquarters are located in Atlanta, Georgia. The Company
rents approximately 34,540 square feet at this location under leases that expire
June 29, 2002.
The following table summarizes certain information regarding the
Company's principal properties.
4
APPROXIMATE OWNED/
LOCATION USE SQUARE FEET LEASED
-------- --- ------------ --------
Atlanta, Georgia....................... Administrative and sales office 34,540 Leased(1)
Aguascalientes, Mexico................ Offices, warehouse, and distribution 60,300 Leased(2)
center
Berea, Kentucky........................ Offices, manufacturing, warehouse, and 53,000 Owned
distribution facilities and retail
store
Compton, California.................... Offices, warehouse and distribution 157,400 Leased(3)
center
Compton, California.................... Warehouse 100,000 Leased(4)
Gonzales, Louisiana.................... Office, warehouse, and distribution 60,000 Leased(5)
center
New York, New York..................... Sales and design offices 13,100 Leased(6)
Prairieville, Louisiana............... Offices and warehouse 23,175 Leased(7)
Huntington Beach, California........... Offices 7,600 Leased(8)
Roxboro, North Carolina................ Two warehouses 215,000 Leased(9)
Roxboro, North Carolina................ Warehouse and Outlet Store 36,500 Owned(10)
Timberlake, North Carolina............. Two buildings, housing manufacturing 420,000 Owned(11)
facilities, warehouse and distribution
centers, and administrative offices
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(1) Leases expire June 29, 2002, portions sub-leased.
(2) Lease expire January 15, 2003.
(3) Lease expires May 31, 2003 (renewable for one three-year period).
(4) Lease expires May 31, 2004.
(5) Lease expires March 31, 2002.
(6) Lease expires September 30, 2006.
(7) Leases expire March 31, 2003.
(8) Lease expires April 30, 2004.
(9) Leases expire as follows: (a) 76,500 square feet on February 28, 2005; (b)
138,500 square feet on month to month leases.
(10) Sold July 17, 2001.
(11) 340,000 square foot building sold June 14, 2001.
The Company also leases space for its various sales offices and showrooms.
Management believes that its properties are suitable for the purposes
for which they are used, are in generally good condition and provide adequate
production capacity for current and anticipated future operations. The Company's
business is somewhat seasonal so that during the late summer and fall months
these facilities are fully utilized, while at other times of the year the
Company has excess capacity.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is 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 condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended April 1, 2001.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
5
The Company is authorized by its Articles of Incorporation to issue up
to 50,000,000 shares of capital stock, all of which are designated Common Stock,
par value $1.00 per share.
COMMON STOCK
Effective April 10, 2001, the Company's common stock (the "Common
Stock") was removed from the listing of the New York Stock Exchange ("NYSE") as
it fell below the minimum standards of market capitalization for continued
listing by the NYSE. The Common Stock currently trades on the NASDAQ OTC
Bulletin Board with the ticker symbol "CRWS". The following table presents
quarterly information on the price range of the Company's Common Stock for the
fiscal years ended April 1, 2001 and April 2, 2000. This information indicates
the high and low sale prices as reported by the NYSE.
QUARTER HIGH LOW
------- ---- ---
FISCAL 2001
First Quarter............................................................................... $ 2 1/4 $ 1 1/8
Second Quarter.............................................................................. 1 1/4 3/8
Third Quarter............................................................................... 1 5/8 1/4
Fourth Quarter.............................................................................. 9/16 9/32
FISCAL 2000
First Quarter............................................................................... $ 5 7/8 $ 4 3/8
Second Quarter.............................................................................. 4 1/2 3 3/4
Third Quarter............................................................................... 3 1/4 2 3/8
Fourth Quarter.............................................................................. 3 1 5/16
As of August 14, 2001 there were issued and outstanding 9,421,437
shares of the Company's Common Stock held by approximately 498 registered
holders. The estimated number of beneficial holders does not reflect the
approximately 770 individual employee accounts in the Company's Employee Stock
Ownership Plan. At August 14, 2001, the Company's Common Stock closed at $0.55.
In fiscal 2000, the Company paid a dividend of $0.03 per share on its
Common Stock on June 27, 1999, September 26, 1999, and December 26, 1999. As
part of the conditions under its loan agreements and to conserve liquidity, the
Company has not paid a dividend since December 26, 1999. The Company has no
plans to resume payment of dividends.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below for the five years ended
April 1, 2001 is from the Company's financial statements. The data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and related
notes included elsewhere in this Annual Report.
6
FISCAL YEAR
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In thousands, except per share data 2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ---------
FOR THE YEAR
Net sales................................. $ 247,515 $ 319,893 $ 362,071 $ 319,238 $256,385
Gross profit.............................. 18,542 35,156 51,259 71,089 51,737
(Loss) earnings from operations........... (59,555) (19,558) (7,026) 18,993 11,641
Net (loss) earnings....................... (73,587) (29,148) (11,772) 7,806 3,631
Basic (loss) earnings per share........... (8.55) (3.39) (1.37) 0.97 0.46
Diluted (loss) earnings per share......... (8.55) (3.39) (1.37) 0.92 0.45
Cash dividends per share.................. 0.00 0.09 0.12 0.12 0.12
AT YEAR END
Total assets.............................. $ 90,678 $ 215,004 $ 264,851 $ 241,666 $189,556
Long-term debt............................ 47,650 106,593 72,857 50,100 71,200
Shareholders' (deficit) equity (16,773) 56,815 86,779 97,323 85,695
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ACQUISITIONS AND DISPOSITIONS
In response to changing business conditions in the textile industry,
the Company made significant changes in its business operations over the last
eighteen months. In addition to a program of cost reductions and
rationalization, the Company outsourced virtually all of its manufacturing to
domestic and foreign contract manufacturers with the exception of the specialty
hand wovens at Churchill Weavers and screen-printed infant bibs produced by
Burgundy in Mexico. The Woven Products division, with manufacturing primarily in
north Georgia, was sold on November 14, 2000 and proceeds of $32.3 million were
used to reduce debt. Following the outsourcing of adult bedding, the Roxboro,
North Carolina plant was sold on June 14, 2001 and the proceeds of $8.0 million
were used to reduce debt. Also, the Company made a decision to exit the Adult
Bedding and Bath Business and the net assets of $13.7 million were held for sale
at April 1, 2001; the sale was completed on July 23, 2001. Following the sale of
the Adult Bedding and Bath business as of July 23, 2001, the Company will be
primarily in the infant and juvenile products business. The provision for
impairment includes $12.4 million for a computer system that was abandoned in
Fiscal 2001. The effect of these transactions on fiscal 2001 operating results
is discussed below in the section "Results of operations: Fiscal 2001 Compared
to Fiscal 2000."
During the fiscal year ended March 28, 1999, the Company acquired
inventory and certain other assets associated with the Calvin Klein Home
business from DHA Home, Inc., the former Calvin Klein Home licensee, and began
integrating this business into its Roxboro, North Carolina facilities. In the
fourth quarter of the fiscal year ended March 28, 1999, the Company sold its
wholly-owned subsidiary, Textile, Inc., located in Ronda, North Carolina.
Textile, Inc. manufactured woven throws and decorative home products.
RESULTS OF OPERATIONS: FISCAL 2001 COMPARED TO FISCAL 2000
Total net sales for fiscal 2001 decreased $72.4 million, or 22.6%, to
$247.5 million. Net sales of bedroom and bath products decreased $45.1 million
to $90.5 million, net sales of throws decreased $16.0 million to $55.3 million,
and net sales of infant and juvenile products decreased $11.3 million to $101.6
million.
The decrease in sales of throws was due to the sale of the Woven
Products division on November 14, 2000. The decrease in sales of bedroom and
bath products was the result of decreased sales in the Studio bedding line which
was largely phased out during fiscal 2001, as well as the sale of the Woven
Products division. The decrease in sales of infant and juvenile products was
primarily attributable to decreased sales of infant bedding and Pillow
Buddies(R) partly offset by an increase in sales of infant bibs and bath
products.
In fiscal 2001, cost of sales increased to 92.5% of net sales from
89.0% in fiscal 2000. The increase resulted from inventory write downs of $2.9
million and $13.3 million, respectively, related to the sale of the Woven
Products division and the Adult Bedding and Bath business, partially offset by
lower manufacturing variances resulting from the restructuring and outsourcing.
Marketing and administrative expenses decreased by $11.4 million, or
20.8% for fiscal 2001 as the Company continued its restructuring. Marketing and
selling expenses decreased by $7.3 million from $26.6 million in fiscal 2000 to
$19.3 million in fiscal
7
2001 as a result of the restructuring and reduced sales. Administrative expenses
decreased from $27.1 million to $22.9 million as cost reductions were partially
offset by restructuring expenses such as consultants. Goodwill amortization
increased by $0.1 million to $1.1 million.
Loss on disposition of assets was $6.5 million, representing the loss
on sale of the Woven Products division, compared to nil in the prior year.
Gains, primarily on the sale of real property in Louisiana and North Carolina,
were offset by other losses. The provision for impairment of $28.2 million
includes a $4.9 million loss on sale of the Timberlake, North Carolina plant, a
$10.9 million impairment for the expected loss on sale of the Adult Bedding
business and a $12.4 million impairment for abandoned computer systems. Losses
on sale of inventory of $2.9 million and $13.3 million were also incurred in
connection with the sales of the Woven Products division and the Adult Bedding
business, respectively. This expense was included in cost of sales. Because of
the sale of assets and the refinancing that occurred July 23, 2001, the
historical results are not indicative of the Company's future operations.
Interest expense increased by $1.2 million as a result of higher
interest rates. Other income increased by $0.8 million due to a reduction in
other expenses.
In fiscal 2001, the benefit of the operating losses was equivalent to
an effective tax rate of 0% compared to 12.2% in fiscal 2000. Due to the losses
incurred, the Company has a net operating loss carryforward of $55.9 million
that is available to offset future taxable income, although a valuation reserve
has been established for the benefit of the carryforward due to uncertainty
regarding realization.
RESULTS OF OPERATIONS: FISCAL 2000 COMPARED TO FISCAL 1999
Total net sales for fiscal 2000 decreased $42.2 million, or 11.6%, to
$319.9 million. Net sales of bedroom and bath products decreased $9.9 million to
$135.6 million, net sales of throws decreased $26.9 million to $71.3 million,
and net sales of infant and juvenile products decreased $4.7 million to $112.9
million.
The decrease in sales of bedroom and bath products was the result of
decreased sales in the Studio bedding line, partly offset by strong growth in
the sales of Calvin Klein Home products. The decrease in sales of throws was
primarily attributable to decreased sales of woven bedspreads and imported
fleece throws. Sales of woven products were adversely affected by problems in
the ERP implementation starting in July 1999 that prevented timely shipment and
billing of product.
As a result of shipping delays, the Company experienced continued
increases in customer claims and closeout inventory. Despite the decrease in
sales, sales deductions and allowances increased by $6.4 million, or 2% of net
sales. The decrease in sales of infant and juvenile products was primarily
attributable to decreased sales of Pillow Buddies(R) as the product matured and
to decreased sales of infant bedding, partly offset by an increase in sales of
infant bibs and bath.
In fiscal 2000, cost of sales increased to 89.0% of net sales from
85.8% in fiscal 1999. Reasons for the increase include the lower level of sales
compared to certain fixed costs, continuing decline in the utilization of the
Roxboro, North Carolina facilities and increased royalty expense of $2.4
million.
Marketing and administrative expenses decreased by $1.8 million, or
3.1%, for fiscal 2000 as the Company responded to declines in sales by reducing
expenses.
Interest expense increased by $3.6 million as a result of both higher
borrowings and higher interest rates.
In fiscal 2000, the benefit of the operating losses was equivalent to
an effective tax rate of 12.2% compared to 30.8% in fiscal 1999. Due to the
losses incurred, the Company has a net operating loss carryforward of $42
million that is available to offset future taxable income, although a valuation
reserve has been established for the benefit of the carryforward due to
uncertainty regarding realization.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $25.0 million for the
year ended April 1, 2001 compared to $3.2 million for the year ended April 2,
2000. Cash of approximately $57.2 million from decreased working capital more
than offset the increased loss. Net cash provided by investing activities was
$24.2 million for the year ended April 1, 2001 compared to cash used in
investing activities of $6.5 million for the year ended April 2, 2000. The
increase in cash provided by investing activities reflects the sale of fixed
assets as well as a decline in expenditures for new equipment. Cash used for
financing activities was $49.6 million for the year
8
ended April 1, 2001 compared to cash provided by financing activities of $4.0
million for the year ended April 2, 2000. The decrease in cash provided by
financing activities was due to repayment of loans from the proceeds of asset
sales and the repayment of factor advances from decreased working capital. As of
April 1, 2001, cash of $0.5 million was restricted and assigned as collateral to
secure indemnities related to the sale of the Wovens division. Letters of credit
issued to guarantee minimum royalties and workmans' compensation liabilities of
$2.0 million and $0.7 million, respectively, are secured by accounts receivable
due from factor.
The Company's ability to make scheduled payments of principal, to pay
the interest on, or to refinance its maturing indebtedness, to fund capital
expenditures or to comply with its debt covenants, will depend upon future
performance. The Company's future performance is, to a certain extent, subject
to general economic, financial, competitive, legislative, regulatory and other
factors beyond its control. Based upon the current level of operations, the
Company believes that cash flow from operations together with revolving credit
availability will be adequate to meet liquidity needs.
On July 23, 2001 the Company completed a refinancing of its debt. The
new credit facilities include the following:
Revolving Credit of up to $19 million including a $3 million sub-limit
for letters of credit, $14.0 million drawn at closing. Interest rate
of LIBOR plus 2.75%, maturity June 30, 2004. Secured by a first lien on
all assets.
Senior Notes of $14 million. Interest rate of 10% plus additional
interest contingent upon cash flow availability of 3%. Maturity June
30, 2006. Secured by a first lien on all assets.
Senior Subordinated Notes of $16 million. Interest rate of 10% plus an
additional 1.65% payable by delivery of a promissory note due July 23,
2007. Maturity July 23, 2007, secured by a second lien on all assets.
In addition to principal and interest, a payment of $8 million is due
on the earliest of (i) maturity of the notes, (ii) prepayment of the
notes, or (iii) sale of the Company. The original issue discount of
$4.1 million on this non-interest bearing note at a market interest
rate of 12% will be amortized over the life of the notes.
The new credit facilities contain covenants regarding minimum levels of
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"),
maximum total debt/EBITDA, maximum senior debt to EBITDA, minimum EBITDA to cash
interest, and minimum shareholders' equity. The covenants also include
restrictions on capital expenditures, dividends, and stock repurchases.
Minimum annual maturities adjusted to reflect the July 23, 2001 refinancing are
as follows:
(in thousands)
FISCAL REVOLVER SENIOR NOTES SUB NOTES TOTAL
-------- ------------ --------- -----
2002 - $ 250 - $ 250
2003 - 2,000 - 2,000
2004 - 2,000 - 2,000
2005 $14,000 2,000 - 16,000
2006 - 2,000 - 2,000
2007 - 5,750 - 5,750
2008 - - $24,000* 24,000
------- ------- ------- --------
Total $14,000 $14,000 $24,000 $ 52,000
*includes $8,000 non-interest bearing note issued at an original issue
discount of $4.1 million.
In the event that required debt service exceeds 70% of free cash flow
(EBITDA less capital expenditures and cash taxes paid), the excess of contingent
interest and principal amortization over 70% will be deferred until maturity of
the Senior Notes in June 2006. Contingent interest plus additional principal
payments will be due annually up to 70% of free cash flow.
As part of the refinancing, the Company issued to the Lenders warrants
for non-voting common stock that are convertible into common stock equivalent to
65% of the shares of the Company on a fully diluted basis at a price of 11.3
cents per share. The warrants are non-callable and expire in six years. The
value of the warrants of $2.4 million using the Black-Scholes option pricing
model was credited to additional paid in capital in the second quarter of fiscal
2002. Also in the second quarter of fiscal 2002, the Company recognized an
extraordinary item of $25.0 million representing cancellation of debt income in
connection with the refinancing.
Below is a comparison of the April 1, 2001 balance sheet with the pro
forma impact of the refinancing and the disposition of
9
the Adult Bedding and Bath business:
CROWN CRAFTS, INC.
CONDENSED BALANCE SHEET
in millions of dollars Pro forma
April 1, 2001 April 1, 2001
------------- -------------
Current assets $ 40.7 $ 42.5
Assets held for sale 21.7 -
Fixed assets, net 3.9 3.9
Other assets 24.4 24.4
------------- -------------
Total assets $ 90.7 $ 70.8
============= =============
Accounts payable $ 8.5 $ 6.0
Accrued liabilities 6.5 6.2
Current maturities of long term debt 44.0 0.3
------------- -------------
Total current liabilities 59.0 12.5
Long term debt 47.7 47.7
Other liabilities 0.8 -
Shareholders' (deficit) equity (16.8) 10.6
------------- -------------
Total liabilities and shareholders' (deficit)
equity $ 90.7 $ 70.8
============= =============
The Company's notes and the credit facilities contain similar
restrictive covenants requiring the Company to maintain certain ratios of
earnings to fixed charges and of total debt to total capitalization. In
addition, the bank revolving credit facilities contain certain covenants
requiring the Company to maintain minimum levels of shareholders' equity and
certain ratios of total debt to cash flow. The bank facilities also place
restrictions on the amounts the Company may expend on acquisitions and purchases
of treasury stock and currently prohibit the payment of dividends. Other
covenants of these revolving credit facilities require the Company to maintain
certain financial ratios and place restrictions on the amounts the Company may
expend on acquisitions.
On August 31, 2000, the Company concluded a restructuring of its debt.
The agreements extended the maturity of the debt to April 3, 2001 and adjusted
financial and other covenants based on the Company's projections. The
restructured loan covenants limited capital expenditures for fiscal 2001 to $4.4
million, limited the level of advances on factored accounts receivable, required
certain levels of borrowing base assets relative to the debt, and required
certain levels of cash flow on a monthly basis. At certain times during the
year, the Company was not in compliance with certain of these covenants and
obtained amendments of the loan agreements to waive such noncompliance.
Compliance and reporting to the lenders is daily with respect to the level of
factor advances and borrowing base assets, and monthly with respect to other
covenants. In exchange, the Company issued to the Lenders warrants exercisable
for 5% of the Company's issued and outstanding stock exercisable not later than
December 31, 2005. These warrants were cancelled in connection with the July 23,
2001 refinancing. As of August 31, 2000, the interest rate on the credit
facilities was increased by 1% to each bank's base rate plus 2% and on the notes
placed with an insurance company to 11.77%. The margin over Base Rate increased
to 4% in the quarter ended April 1, 2001. Effective April 3, 2001, the Lenders
extended the maturity of the loans to June 30, 2001 and subsequently to August
6, 2001 with a margin over base rate of 1%.
To reduce its exposure to credit losses and to enhance its cash flow
forecasts, the Company factors the majority of its trade accounts receivable.
The Company's factor establishes customer credit lines, and accounts for and
collects receivable balances. The factor remits payment to the Company on the
due dates of the factored invoices. The factor assumes all responsibility for
credit losses on sales within approved credit lines, but may deduct from its
remittances to the Company the amounts of customer deductions for returns,
allowances, disputes and discounts. The Company's factor at any time may
terminate or limit its approval of shipments to a particular customer. If such a
termination occurs, the Company may either assume the credit risks for shipments
after the date of such termination or cease shipments to such customer.
10
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Financial Instruments and Hedging Activities". SFAS No. 133,
effective for the Company on April 2, 2001, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. The Company has no contracts or other instruments to which
SFAS 133 is applicable and the adoption of this standard, as amended, is not
expected to have a material impact on the Company's results of operations,
financial position or cash flow.
In 1999, Staff Accounting Bulletin 101 ("SAB 101") "Revenue
Recognition" was issued requiring that revenue be recognized when certain
criteria are met. In addition, the Emerging Issues Task Force ("EITF") reached a
consensus on issue EITF 00-10 in September 2000, "Accounting for Shipping and
Handling Fees and Costs". The Company has analyzed the implications of both SAB
101 and EITF 00-10, and these pronouncements did not have a material impact on
the Company's consolidated financial statements.
In June 2001 the FASB also approved SFAS No. 142, Goodwill and Other
Intangible Assets. This statement prescribes that goodwill should no longer be
amortized upon adoption of the standard. Instead, goodwill will be tested
annually for impairment, and on an interim basis if certain impairment
indicators are present. Additionally, intangible assets with an indefinite
useful life may not be amortized. The company will adopt SFAS No. 142 on April
1, 2002.
FORWARD-LOOKING INFORMATION
This annual report contains forward-looking statements within the meaning of
the federal securities law. 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
are intended to 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 anticipated. These risks include,
among others, general economic conditions, changing competition, the level and
pricing of future orders from the Company's customers, the Company's dependence
upon third-party suppliers, including some located in foreign countries, such as
Indonesia, with unstable political situations, the Company's ability to
successfully implement new information technologies, the Company's ability to
integrate its acquisitions and new licenses, and the Company's ability to
implement operational improvements in its acquired businesses.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on
debt, commodity prices and foreign exchange rates.
The Company's exposure to interest rate risk relates to its floating rate
debt, $60.3 million of which was outstanding at April 1, 2001. Each 1.0
percentage point increase in interest rates would impact pretax earnings by $0.6
million at the debt level of April 1, 2001 (excludes $31.4 million of fixed rate
debt.)
The Company's exposure to commodity price risk primarily relates to changes
in the price of cotton, which is a principal raw material in a substantial
number of the Company's products.
The Company's exposure to foreign exchange rates relates to its Mexican
manufacturing subsidiary. During the fiscal year ended April 1, 2001, this
subsidiary manufactured products for the Company with a value of approximately
$4.4 million. The Company's investment in the subsidiary was approximately $3.0
million at April 1, 2001.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages F-1 through F-16 herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has neither changed its independent accountants nor had any
disagreements on accounting or financial disclosure with such accountants.
11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to the Company's directors and executive
officers is set forth in the Company's Proxy Statement for the Annual Meeting of
Shareholders (the "Proxy Statement") under the captions "Election of Directors"
and "Executive Officers" and is incorporated herein by reference. The
information with respect to Item 405 of Registration S-K is set forth in the
Proxy Statement under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in
the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Voting Rights and
Principal Shareholders" in the Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Compensation Committee
Interlocks and Insider Participation" in the Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULE, AND REPORTS ON FORM 8-K
(A)1. FINANCIAL STATEMENTS
The following consolidated financial statements of Registrant are filed
with this report and included in Part II, Item 8:
PAGE
----
Independent Auditors' Report........................................................................ F-1
Consolidated Balance Sheets as of April 1, 2001 and April 2, 2000.................................. F-2
Consolidated Statements of Operations and Comprehensive Loss for the Three Fiscal
Years in the Period Ended April 1, 2001........................................................... F-3
Consolidated Statements of Changes in Shareholders' (Deficit) Equity for the Three Fiscal Years in
the Period Ended April 1, 2001.................................................................... F-4
Consolidated Statements of Cash Flows for the Three Fiscal Years in the Period
Ended April 1, 2001............................................................................... F-5
Notes to Consolidated Financial Statements.......................................................... F-6
(A)2. FINANCIAL STATEMENT SCHEDULE
The following financial statement schedule of Registrant is filed with this report:
Schedule II -- Valuation and Qualifying Accounts.................................................. Page 13
All other schedules not listed above have been omitted because they are
not applicable or the required information is included in the financial
statements or notes thereto.
12
CROWN CRAFTS, INC. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
-------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ------------ ------------ ------------ ------------
CHARGED TO
BALANCE AT COSTS AND BALANCE AT
BEGINNING (REVERSED FROM) END OF
OF PERIOD EXPENSES DEDUCTIONS(1) PERIOD
--------- --------------- ----------
(IN THOUSANDS)
Accounts Receivable Valuation Accounts:
Year Ended March 28, 1999
Reserve for doubtful accounts....................................$ 699 $ 740 $ 710 $ 729
Reserve for customer deductions.................................. 2,708 1,801 - 4,509
Year Ended April 2, 2000
Reserve for doubtful accounts.................................... 729 541 661 609
Reserve for customer deductions.................................. 4,509 653 5,162
Year Ended April 1, 2001
Reserve for doubtful accounts.................................... 609 (32) 465 176
Reserve for customer deductions.................................. 5,162 (3,401)(2) - 1,761
Inventory Valuation Accounts:
Year Ended March 28, 1999
Reserve for discontinued and irregulars..........................$ 3,075 $ 2,927 $ - $6,002
Year Ended April 2, 2000
Reserve for discontinued and irregulars.......................... 6,002 174 - 6,176
Year Ended April 1, 2001
Reserve for discontinued and irregulars.......................... 6,176 (4,026)(2) - 2,150
---------
(1) Deductions from the reserve for doubtful accounts represent the amount
of accounts written off reduced by any subsequent recoveries.
(2) Credits relate to assets held for sale at April 1, 2001.
13
(A)3. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
The following Executive Compensation Plans and Arrangements are filed
with this Form 10-K or have been previously filed as indicated below:
1. Crown Crafts, Inc. 1976 Non-Qualified Stock Option Plan. (4)(Exhibit 10.1)
2. Philip Bernstein Death Benefits Agreement dated March 30, 1992 (3)
(Exhibit 10.2)
3. Description of Crown Crafts, Inc. Executive Incentive Bonus Plan (3)
(Exhibit 10.3)
4. Crown Crafts, Inc. 1995 Stock Option Plan (1) (Exhibit 10.4)
5. Form of Nonstatutory Stock Option Agreement (pursuant to 1995 Stock Option
Plan) (1) (Exhibit 10.5)
6. Form of Nonstatutory Stock Option Agreement for Nonemployee Directors
(pursuant to 1995 Stock Option Plan) (1) (Exhibit 10.6)
(A)5. EXHIBITS
Exhibits required to be filed by Item 601 of Regulation S-K are included as
Exhibits to this report as follows:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------------ -----------------------
2.1 -- Merger Agreement dated as of October 8, 1995 between and among
Registrant and CC Acquisition Corp, and Neal Fohrman and Stanley
Glickman and The Red Calliope and Associates, Inc. (5)
2.2 -- Merger Agreement dated as of July 23, 2001 by and among the Company, CCDI,
Buyer and Merger Sub (the "Merger Agreement"). (9)
3.1 -- Second Amended and Restated Articles of Incorporation of the Company. (9)
3.2 -- Bylaws of Registrant. (1)
3.3 -- Amendments to Bylaws dated March 23, 2001.
4.1 -- Instruments defining the rights of security holders are contained in the
Restated Articles of Incorporation of Registrant, and Article I of the
Restated Bylaws of Registrant. (1)
4.2 -- Form of Rights Agreement dated as of August 11, 1995 between the
Registrant and Trust Company Bank, including Form of Right Certificate
And Summary of Rights to Purchase Common Shares. (2)
4.3 -- Form of Registration Rights Agreement entered into in connection with the
Subordinated Note and Warrant Purchase Agreement dated as of July 23, 2001 by
and among the Company and the Lenders (the "Sub Debt Agreement")(included as
Exhibit C to the Sub Debt Agreement). (9)
10.1 -- Crown Crafts, Inc. Non-Qualified Stock Option Plan. (4)
10.2 -- Philip Bernstein Death Benefits Agreement dated March 30, 1992. (3)
10.3 -- Description of Crown Crafts, Inc. Executive Incentive Bonus Plan. (3)
10.4 -- Crown Crafts, Inc. 1995 Stock Option Plan. (1)
10.5 -- Form of Nonstatutory Stock Option Agreement (pursuant to 1995 Stock
Option Plan). (1)
10.6 -- Form of Nonstatutory Stock Option Agreement for Nonemployee Directors
(pursuant to 1995 Stock Option Plan). (1)
10.7 -- Employment Agreement dated as of July 23, 2001 by and between the Company
and E. Randall Chestnut. (9)
10.8 -- Employment Agreement dated as of July 23, 2001 by and between the Company
and Amy Vidrine Samson. (9)
10.9 -- Form of Restricted Stock Agreement entered into in connection with the Merger
Agreement. (9)
10.10 -- Credit Agreement dated as of July 23, 2001 by and among the Borrowers,
Wachovia, as Agent, and the Lenders (the "Credit Agreement"). (9)
14
10.11 -- Form of Revolving Note issued in connection with the Credit Agreement (included
as Exhibit A-1 to the Credit Agreement). (9)
10.12 -- Form of Term Note issued in connection with the Credit Agreement (included as
Exhibit A-2 to the Credit Agreement). (9)
10.13 -- Form of Domestic Stock Pledge Agreement entered into in connection with the
Credit Agreement (included as Exhibit N to the Credit Agreement). (9)
10.14 -- Form of Foreign Stock Pledge Agreement entered into in connection with the Credit
Agreement (included as Exhibit T to the Credit Agreement). (9)
10.15 -- Mortgage, Security Agreement and Fixture Financing Statement dated September
22, 1999 from Churchill Weavers, Inc. ("Churchill") to Wachovia, as Collateral
Agent for the Lenders, as amended by that First Amendment to Mortgage, Security
Agreement and Fixture Financing Statement dated July 23, 2001, entered into in
connection with the Credit Agreement. (9)
10.16 -- Sub Debt Agreement. (9)
10.17 -- Form of Note issued in connection with the Sub Debt Agreement (included as
Exhibit A-1 to the Sub Debt Agreement). (9)
10.18 -- Form of Warrant issued in connection with the Sub Debt Agreement (included as
Exhibit B to the Sub Debt Agreement). (9)
10.19 -- Form of Domestic Stock Pledge Agreement entered into in connection with the Sub
Debt Agreement (included as Exhibit D to the Sub Debt Agreement). (9)
10.20 -- Form of Foreign Stock Pledge Agreement entered into in connection with the Sub
Debt Agreement (included as Exhibit E to the Sub Debt Agreement). (9)
10.21 -- Form of Security Agreement entered into in connection with the Sub Debt
Agreement (included as Exhibit F to the Sub Debt Agreement). (9)
10.22 -- Mortgage, Security Agreement and Fixture Financing Statement dated July 23,
2001 from Churchill to Wachovia, as Collateral Agent for the Lenders, entered into
in connection with the Sub Debt Agreement. (9)
10.23 -- Amended and Restated Security Agreement dated as of July 23, 2001 by and among
the Borrowers and Wachovia, as Collateral Agent for the Lenders, entered into in
connection with the Credit Agreement. (9)
10.24 -- Form of Non-Competition and Non-Disclosure Agreement entered into in
connection with the Merger Agreement (included as Exhibit E to the Merger
Agreement). (9)
10.25 -- License Agreement dated January 1, 1998 between Disney Enterprises, Inc.
as Licensor and Crown Crafts, Inc. as Licensee (6)
10.26 -- License Agreement dated May 11, 1998 between Calvin Klein, Inc. as
Licensor, Crown Crafts Designer, Inc. (a wholly-owned subsidiary of the
Registrant), and Crown Crafts, Inc. as Guarantor. (6)
21 -- Subsidiaries of the Registrant
23 -- Consent of Deloitte & Touche LLP
------------------
(1) Incorporated herein by reference to exhibit of same number to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
October 1, 1995.
(2) Incorporated herein by reference to exhibit of same number to
Registrant's Report on Current Form 8-K dated August 22, 1995.
(3) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended March
28, 1993.
(4) Incorporated herein by reference to exhibit of same number to
Registrant's Registration Statement on Form S-8, filed April 8, 1994.
(Reg. No. 33-77558).
(5) Incorporated herein by reference to exhibit of same number to
Registrant's Report on Current Form 8-K dated November 13, 1995.
(6) Incorporated herein by reference to exhibit of the same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended March
29, 1998.
15
(7) Incorporated herein by reference to exhibit of same number to
Registrant's Report on Current Form 8-K dated August 4, 1999.
(8) Incorporated herein by reference to exhibit of same number to
Registrant's Annual Report on Form 10-K for the fiscal year ended April
1, 2001.
(9) Incorporated herein by reference to exhibit of same number to
Registrant's Report on current Form 8-K dated July 23, 2001.
(b) Reports on Form 8-K: No reports on Form 8-K were filed for the quarter
ending April 1, 2001.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ E. RANDALL CHESTNUT
-----------------------
E. Randall Chestnut
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ E. RANDALL CHESTNUT Chief Executive Officer, September 20, 2001
E. Randall Chestnut Director
/s/ WILLIAM T. DEYO, JR. Director September 20, 2001
William T. Deyo, Jr.
/s/ STEVEN E. FOX Director September 20, 2001
Steven E. Fox
/s/ SIDNEY KIRSCHNER Director September 20, 2001
Sidney Kirschner
/s/ ZENON S. NIE Director September 20, 2001
Zenon S. Nie
/s/ WILLIAM P. PAYNE Director September 20, 2001
William P. Payne
/s/ DONALD RATAJCZAK Director September 20, 2001
Donald Ratajczak
/s/ JAMES A. VERBRUGGE Director September 20, 2001
James A. Verbrugge
/s/ CARL A. TEXTER Chief Accounting Officer September 20, 2001
Carl A. Texter
16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Audited Financial Statements:
Independent Auditors' Report....................................................................... F-2
Consolidated Balance Sheets as of April 1, 2001 and April 2, 2000.................................. F-3
Consolidated Statements of Operations and Comprehensive Loss for the Three Fiscal Years
in the Period Ended April 1, 2001............................................................... F-4
Consolidated Statements of Changes in Shareholders' (Deficit) Equity for the Three Fiscal
Years in the Period Ended April 1, 2001......................................................... F-5
Consolidated Statements of Cash Flows for the Three Fiscal Years in the Period Ended April 1, 2001. F-6
Notes to Consolidated Financial Statements......................................................... F-7
Note # 1 -- DESCRIPTION OF BUSINESS
Note # 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Note # 3 -- ACQUISITIONS
Note # 4 -- DISCONTINUANCE OF CERTAIN BUSINESSES
Note # 5 -- INVENTORIES
Note # 6 -- FINANCING ARRANGEMENTS
Note # 7 -- INCOME TAXES
Note # 8 -- RETIREMENT PLANS
Note # 9 -- STOCK OPTIONS
Note # 10 -- LOSS PER SHARE
Note # 11 -- MAJOR CUSTOMERS
Note # 12 -- COMMITMENTS AND CONTINGENCIES
Note # 13 -- SEGMENT AND RELATED INFORMATION
Note # 14 -- SUBSEQUENT EVENTS
Supplemental Financial Information:
Selected Quarterly Financial Information (unaudited)............................................... F-16
17
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Crown Crafts, Inc.
We have audited the accompanying consolidated balance sheets of Crown Crafts,
Inc. and subsidiaries as of April 1, 2001 and April 2, 2000, and the related
consolidated statements of operations and comprehensive loss, changes in
shareholders' (deficit) equity, and cash flows for each of the three years in
the period ended April 1, 2001. Our audits also included the financial statement
schedule listed at Item 14. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Crown Crafts, Inc. and subsidiaries
as of April 1, 2001 and April 2, 2000, and the results of their operations and
their cash flows for each of the three years in the period ended April 1, 2001
in conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
July 6, 2001
(July 23, 2001 as to Notes 6 and 14)
F-1
Crown Crafts, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
April 1, 2001 and April 2, 2000
dollar amounts in thousands, except share and per share amounts 2001 2000
---------------------------------------------------------------------------------------------------------------------
ASSETS
---------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 588 $ 1,453
Restricted cash 508 -
Accounts receivable (net of allowances of $1,937 in 2001 and $5,771 in 2000):
Due from factor 15,588 25,432
Other 2,213 3,580
Inventories, net 19,564 73,269
Deferred income taxes - 1,770
Other current assets 2,233 6,985
Assets held for sale 21,661 -
---------------------------------------------------------------------------------------------------------------------
Total current assets 62,355 112,489
---------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT - AT COST:
Land, buildings and improvements 2,736 45,613
Machinery and equipment 3,873 97,972
Furniture and fixtures 489 2,142
---------------------------------------------------------------------------------------------------------------------
7,098 145,727
Less accumulated depreciation 3,184 72,705
---------------------------------------------------------------------------------------------------------------------
Property, plant and equipment - net 3,914 73,022
---------------------------------------------------------------------------------------------------------------------
OTHER ASSETS:
Goodwill (net of amortization of $5,207 in 2001 and $4,067 in 2000) 24,088 25,228
Other 321 4,265
---------------------------------------------------------------------------------------------------------------------
Total other assets 24,409 29,493
---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 90,678 $ 215,004
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
---------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 8,470 $ 17,997
Accrued wages and benefits 2,144 5,022
Accrued royalties 1,086 3,538
Other accrued liabilities 3,316 3,444
Current maturities of long-term debt 44,016 19,000
---------------------------------------------------------------------------------------------------------------------
Total current liabilities 59,032 49,001
---------------------------------------------------------------------------------------------------------------------
NON-CURRENT LIABILITIES:
Long-term debt 47,650 106,593
Deferred income taxes 24 1,850
Other 745 745
---------------------------------------------------------------------------------------------------------------------
Total non-current liabilities 48,419 109,188
---------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 12)
---------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' (DEFICIT) EQUITY:
Common stock - par value $1.00 per share, 50,000,000 shares authorized, 8,608,843 issued
and outstanding at April 1, 2001 and 9,983,305 issued at April 2, 2000 8,609 9,983
Additional paid-in capital 27,161 46,096
Retained (deficit) earnings (52,477) 21,110
Cumulative currency translation adjustment (66) (65)
Common stock held in treasury - at cost - (20,309)
---------------------------------------------------------------------------------------------------------------------
Total shareholders' (deficit) equity (16,773) 56,815
---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY $ 90,678 $ 215,004
=====================================================================================================================
See notes to consolidated financial statements.
F-2
Crown Crafts, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Fiscal years ended April 1, 2001, April 2, 2000, and March 28, 1999
in thousands, except loss per share 2001 2000 1999
----------------------------------------------------------------------------------------------------------------
Net sales $ 247,515 $ 319,893 $ 362,071
Cost of products sold 228,973 284,737 310,812
----------------------------------------------------------------------------------------------------------------
Gross profit 18,542 35,156 51,259
Marketing and administrative expenses 43,311 54,714 56,480
Provision for impairment 28,240 - -
Loss on disposition of assets 6,546 - 1,805
----------------------------------------------------------------------------------------------------------------
Loss from operations (59,555) (19,558) (7,026)
Other income (expense):
Interest expense (14,781) (13,572) (9,945)
Other - net 726 (65) (31)
----------------------------------------------------------------------------------------------------------------
Loss before income taxes (73,610) (33,195) (17,002)
Income tax benefit (23) (4,047) (5,230)
----------------------------------------------------------------------------------------------------------------
Net loss (73,587) (29,148) (11,772)
Other comprehensive loss, net of tax:
Foreign currency translation adjustment (1) (42) (19)
----------------------------------------------------------------------------------------------------------------
Comprehensive loss, net of tax $ (73,588) $ (29,190) $ (11,791)
----------------------------------------------------------------------------------------------------------------
Basic loss per share $ (8.55) $ (3.39) $ (1.37)
----------------------------------------------------------------------------------------------------------------
Diluted loss per share $ (8.55) $ (3.39) $ (1.37)
----------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding - basic 8,609 8,609 8,593
----------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding - diluted 8,609 8,609 8,593
================================================================================================================
See notes to consolidated financial statements.
F-3
Crown Crafts, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' (DEFICIT) EQUITY
Fiscal years ended April 1, 2001, April 2, 2000 and March 28, 1999
dollar amounts in thousands, except share and per share amounts
-----------------------------------------------------------------------------------------------------------------------------------
Common Stock Cumulative Treasury Stock
---------------------- Additional Retained Currency ---------------------
Number Paid-in (Deficit) Translation Number
of shares Cost Capital Earnings Adjustment of shares Cost
-----------------------------------------------------------------------------------------------------------------------------------
BALANCES - MARCH 29, 1998 9,654,043 $ 9,654 $ 41,804 $ 63,838 $ (4) 1,260,939 $ 17,969
Net loss (11,772)
Cash dividends ($0.12 per share) (1,034)
Exercises of stock options 215,739 215 3,025
Treasury stock acquired in conjunction
with exercises of stock options 113,523 114 113,523 2,340
Tax benefits realized from exercises
of stock options 1,267
Currency translation adjustment (19)
-----------------------------------------------------------------------------------------------------------------------------------
BALANCES - MARCH 28, 1999 9,983,305 9,983 46,096 51,032 (23) 1,374,462 20,309
Net loss (29,148)
Cash dividends ($0.09 per share) (774)
Currency translation adjustment (42)
-----------------------------------------------------------------------------------------------------------------------------------
BALANCES - APRIL 2, 2000 9,983,305 9,983 46,096 21,110 (65) 1,374,462 20,309
Net loss (73,587)
Currency translation adjustment (1)
Retirement of treasury stock (1,374,462) (1,374) (18,935) (1,374,462) (20,309)
-----------------------------------------------------------------------------------------------------------------------------------
BALANCES - APRIL 1, 2001 8,608,843 $ 8,609 $ 27,161 $(52,477) $ (66) -- $ --
-----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
F-4
Crown Crafts, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal years ended April 1, 2001, April 2, 2000, and March 28, 1999
in thousands 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net loss $(73,587) $(29,148) $(11,772)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation of property, plant and equipment 9,374 12,304 11,421
Amortization of goodwill 1,099 1,030 1,229
Deferred income tax benefit (56) (3,920) (1,909)
Provision for impairment 28,240 -- --
Loss (gain) on disposition of assets 2,752 (439) 2,076
Changes in assets and liabilities, net of effects
of acquisitions of businesses:
Accounts receivable 26,920 15,350 (11,392)
Inventories, net 53,705 14,018 2,720
Other current assets 4,752 320 (1,771)
Other assets 3,944 23 1,084
Accounts payable (9,527) (7,342) 3,765
Accrued liabilities (5,458) 1,041 820
Reclassification of current assets to held for sale (17,112) -- --
---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 25,046 3,237 (3,729)
---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (1,356) (7,263) (21,052)
Acquisitions, net of cash acquired -- (700) (10,072)
Proceeds from disposition of assets 25,591 1,496 2,631
Other (2) (40) (272)
---------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 24,233 (6,507) (28,765)
---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Payment of long-term debt (33,348) (7,243) (100)
(Decrease) increase in notes payable (579) (3,414) 31,300
(Decrease) increase in advances from factor (15,709) 15,410 --
Stock options exercised -- -- 2,281
Cash dividends -- (774) (1,034)
Other -- -- (18)
---------------------------------------------------------------------------------------------------------------------
Net cash (used for) provided by financing activities (49,636) 3,979 32,429
---------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH (357) 709 (65)
Cash and cash equivalents at beginning of year 1,453 744 809
---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,096 $ 1,453 $ 744
---------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes (refunded) paid $ (224) $ 147 $ 190
Interest paid $ 15,097 $ 13,186 $ 9,675
SUPPLEMENTAL DISCLOSURE OF NON CASH
INVESTING AND FINANCING ACTIVITIES
Disposition escrow account $ 508 $ -- $ --
=====================================================================================================================
See notes to consolidated financial statements.
F-5
CROWN CRAFTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED APRIL 1, 2001, APRIL 2, 2000 AND MARCH 28, 1999
NOTE 1 - DESCRIPTION OF BUSINESS
Crown Crafts, Inc. and its subsidiaries (collectively, the "Company")
operate in two principal business segments within the textile industry, 1) adult
home furnishing and juvenile products, and 2) infant products. Adult home
furnishing and juvenile products consists of bedroom and bath products (adult
sheets, comforters and towels), throws and juvenile products (primarily Pillow
Buddies(R)). The infant products segment consists of infant bedding, bibs, and
infant soft goods. Sales are generally made directly to retailers, primarily
department and specialty stores, mass merchants, large chain stores and gift
stores. Following the sale of the Adult Bedding business as discussed in Note 4,
the Company will be primarily in the infant and juvenile products business.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial statements include
the accounts of Crown Crafts, Inc. and its subsidiaries. All significant
intercompany balances and transactions are eliminated in consolidation.
The Company's fiscal year ends on the Sunday nearest March 31. Fiscal
years are designated in the consolidated financial statements and notes thereto
by reference to the calendar year within which the fiscal year ends. The
consolidated financial statements encompass 53 weeks of operations for fiscal
year 2000 and 52 weeks for fiscal years 2001 and 1999.
Cash and Cash Equivalents: The Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.
Use of Estimates: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Significant estimates are
made with respect to the allowances related to accounts receivable for customer
deductions for returns, allowances, and disputes. The Company has a significant
amount of discontinued and irregular raw materials and finished goods which
necessitate the establishment of inventory reserves which are highly subjective.
Actual results could differ from those estimates.
Revenue Recognition: Sales are recorded when goods are shipped to
customers, and are reported net of reserves for estimated returns and allowances
in the consolidated statements of operations and comprehensive loss. Reserves
for returns and allowances are estimated based on historical rates.
Inventory Valuation: Inventories are valued at the lower of first-in,
first-out, cost or market.
Depreciation and Amortization: Depreciation of property, plant and
equipment is computed using the straight-line method over the estimated useful
lives of the respective assets. Estimated useful lives are 15 to 40 years for
buildings, 3 to 7-1/2 years for machinery and equipment, and 8 years for
furniture and fixtures. The cost of improvements to leased premises is amortized
over the shorter of the estimated life of the improvement or the term of the
lease.
The Company reviews for impairment, on a quarterly basis, long-lived
assets and certain identifiable intangibles whenever events or changes in
circumstances indicate that the carrying amount of any asset may not be
reasonable based on estimates of future undiscounted cash flows. In the event of
impairment, the asset is written down to its fair market value. Impairment of
goodwill and write-down, if any, is measured based on estimates of future
undiscounted cash flows including interest charges. Assets to be disposed of are
recorded at the lower of net book value or fair market value less cost to sell
at the date management commits to a plan of disposal and are classified as
assets held for sale on the consolidated balance sheet.
Goodwill, which represents the unamortized excess of purchase price
over fair value of net identifiable assets acquired in business combinations, is
amortized using the straight-line method over periods of up to 30 years. The
Company reviews the carrying values and useful lives of goodwill and other
long-lived assets if the facts and circumstances suggest that their
recoverability may have been impaired. Goodwill is stated net of accumulated
amortization of $5.2 million and $4.1 million at April 1, 2001 and April 2,
2000, respectively. The Company believes that no material impairment of goodwill
or other long-lived assets exists at April 1, 2001.
Provisions for Income Taxes: The provisions for income taxes include
all currently payable federal, state and local taxes that are based upon the
Company's taxable income and the change during the fiscal year in net deferred
income tax assets and liabilities.
F-6
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.
Deferred tax assets have been reduced by a valuation allowance, if necessary, by
the amount of any tax benefits that based on available evidence, are not
expected to be realized.
Treasury Stock: In accordance with Georgia statutes and the Company's
articles of incorporation, in fiscal 2001 treasury stock was retired and
included in authorized but unissued shares.
Stock-Based Compensation: The Company accounts for stock option grants
using the intrinsic value method and only issues stock options that have an
exercise price that is equal to or more than the fair value of the underlying
shares at the date of grant. Accordingly, no compensation expense is recorded in
the accompanying statements of operations and comprehensive loss with respect to
stock option grants.
Segments and Related Information: In 1999, the Company adopted
Statement of Financial Accounting Standards ("SFAS ") No. 131, "Disclosures
about Segments of an Enterprise and Related Information." This statement
requires certain information to be reported about operating segments on a basis
consistent with the Company's internal organizational 2000 structure.
Management's analysis concluded that the Company operates in two operating
segments, 1) adult home furnishings and juvenile products, and 2) infant
products. Required disclosures have been made in Note 13.
Recently Issued Accounting Standards: In June 1998, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for
Derivative Financial Instruments and Hedging Activities". SFAS No. 133,
effective for the Company on April 2, 2001, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. The Company has no contracts or other instruments to which
SFAS No. 133 is applicable and the adoption of this standard, as amended, is not
expected to have a material impact on the Company's results of operations,
financial position or cash flow.
In 1999, Staff Accounting Bulletin 101 ("SAB 101") "Revenue
Recognition" was issued requiring that revenue be recognized when certain
criteria are met. In addition, the Emerging Issues Task Force ("EITF") reached a
consensus on issue EITF 00-10 in September 2000, "Accounting for Shipping and
Handling Fees and Costs". The Company has analyzed the implications of both SAB
101 and EITF 00-10, and these pronouncements did not have a material impact on
the Company's consolidated financial statements.
In June 2001 the FASB also approved SFAS No. 142, Goodwill and Other
Intangible Assets. This statement prescribes that goodwill should no longer be
amortized upon adoption of the standard. Instead, goodwill will be tested
annually for impairment, and on an interim basis if certain impairment
indicators are present. Additionally, intangible assets with an indefinite
useful life may not be amortized. The company will adopt SFAS No. 142 on April
1, 2002.
Reclassifications: Certain prior year financial statement balances have
been reclassified to conform with the current year's presentation.
NOTE 3 - ACQUISITIONS
In May 1998, the Company entered into a license agreement with Calvin
Klein, Inc. which gives the Company the right to manufacture and distribute
Calvin Klein Home bed and bath collections. In August 1998, the Company
purchased inventory and certain other assets from the previous licensee and in
December 1998, purchased additional inventory and assets. The total
consideration for these transactions, including transaction costs, was $10.1
million.
NOTE 4 - DISCONTINUANCE OF CERTAIN BUSINESSES
During the first quarter of fiscal 2001, the Company sold surplus real
property in North Carolina and Louisiana with net proceeds of $888,000 and a
gain on sale of $466,000.
The Company completed the sale of the Wovens division on November 14,
2000 with proceeds of approximately $36.6 million (before selling expenses)
compared to a book value of $42.2 million. The Woven division had annual sales
of approximately $61.4 million and $82.0 million in fiscal 2001 and 2000,
respectively, and was included in the adult home furnishing and juvenile
products segment. The Wovens division included the throws and decorative home
accessories product group and part of the bedroom products group. The disposal
was made as part of a plan to reduce debt and restructure the Company's
operations.
F-7
Included in the sale were inventory, buildings, machinery and
equipment at sites in Calhoun, Dalton and Chatsworth, Georgia; Blowing Rock,
North Carolina; and Manchester, New Hampshire. Details of the loss on sale are
as follows:
$ Million
---------
Write-down of inventory to net realizable value $ 2.9
Loss on sale of property, plant and equipment 2.7
Selling and other expenses 3.8
-----
Total loss $ 9.4
=====
The write-down of inventory of approximately $2.9 million was included
in cost of products sold. The loss on sale of property, plant and equipment and
selling and other expenses were included in loss on disposition of assets.
Selling and other expenses included costs for investment bankers, lawyers, and a
special key employee retention program.
The Company's Timberlake, North Carolina manufacturing plant was
classified as assets held for sale at April 1, 2001. An impairment provision of
$4.9 million for the excess of book value over sale proceeds of $8.0 million was
recognized in fiscal 2001. The sale was completed on June 14, 2001.
As part of the plan to reduce debt and restore profitability, the
Company made a decision to exit the Adult Bedding and Bath Business and its net
assets of $13.7 million were held for sale at April 1, 2001. Expected proceeds
of the sale are $10.5 million cash plus assumption of liabilities of $3.6
million as well as certain contingent liabilities. Cash from the sale will be
used to reduce debt. Included in the sale will be inventory, buildings,
machinery and equipment located at Roxboro, North Carolina as well as various
sales offices. The Adult Bedding and Bath Business had annual sales of
approximately $76.5 million in fiscal 2001 and was included in the adult home
furnishing and juvenile products segment. The Adult Bedding and Bath Business
includes the remainder of the bedroom products group following the sale of the
Wovens division. The estimated loss on sale of property, plant and equipment of
$10.9 million was included in the provision for impairment. The provision for
impairment also includes $12.4 million for abandoned computer systems. The
writedown of $13.3 million for expected loss on sale of inventory was included
in cost of products sold in the fourth quarter of fiscal 2001.
In March 1999, the Company completed the sale of Textile, Inc. a
weaving facility located in Ronda, North Carolina. The sale, which generated
$2.3 million in cash, resulted in a $1.8 million pre-tax loss related to the
write-off of goodwill.
NOTE 5 - INVENTORIES
Major classes of inventory were as follows:
(in thousands) 2001 2000
---------------------------------------------------------------
Raw materials and supplies $ 3,501 $ 27,822
Work in process 1,545 4,925
Finished goods 14,518 40,522
---------------------------------------------------------------
$ 19,564 $ 73,269
---------------------------------------------------------------
Inventory is net of reserves for inventories classified as irregular or
discontinued of $2.2 million and $6.2 million in fiscal 2001 and 2000,
respectively.
NOTE 6 - FINANCING ARRANGEMENTS
Factoring Agreement: The Company assigns the majority of its trade
accounts receivable to a commercial factor. Under the terms of the factoring
agreement, the factor remits payments to the Company on the average due date of
each group of invoices assigned. The factor bears credit losses with respect to
assigned accounts receivable that are within approved credit limits. The Company
bears losses resulting from returns, allowances, claims and discounts. Factoring
fees, which are included in marketing and administrative expenses in the
consolidated statements of operations, were $2.2 million, $2.8 million, and $2.5
million, respectively, in 2001, 2000, and 1999. Factor advances were $0 at April
1, 2001, $15.4 million at April 2, 2000 and $0 at the end of 1999.
Notes Payable and Other Credit Facilities: At April 1, 2001, the
Company had committed lines of credit totaling $30.2 million with two banks at a
floating rate of interest which at April 1, 2000 was 12.0%. No fees or
compensating balances are required under these arrangements, and the lines are
fully drawn at April 1, 2001. Annual average borrowings and weighted average
interest rates under these arrangements were $43.5 million at 11.89% in 2001,
$52.9 million at 8.95% in 2000 and $27.0 million at 7.60% in 1999. These
facilities are secured by substantially all of the Company's assets.
F-8
At April 1, 2001 and April 2, 2000, long term debt consisted of:
(in thousands) 2001 2000
-------------------------------------------------------------
Bank Credit lines $ 30,249 $ 52,737
Promissory notes 31,417 42,856
Floating rate revolving
credit facilities 30,000 30,000
-------- --------
91,666 125,593
Less current maturities 44,016 19,000
-------------------------------------------------------------
$ 47,650 $106,593
-------------------------------------------------------------
On July 23, 2001 the Company completed a refinancing of its debt. The
new credit facilities include the following:
Revolving Credit of up to $19 million including a $3 million sub-limit
for letters of credit, $ 14.0 million drawn at closing. Interest rate
of LIBOR plus 2.75%, maturity June 30, 2004. Secured by a first lien on
all assets.
Senior Notes of $14 million. Interest rate of 10% plus additional
interest contingent upon cash flow availability of 3%. Maturity June
30, 2006. Secured by a first lien on all assets.
Senior Subordinated Notes of $16 million. Interest rate of 10% plus an
additional 1.65% payable by delivery of a promissory note due July 23,
2007. Maturity July 23, 2007, secured by a second lien on all assets.
In addition to principal and interest, a payment of $8 million is due
on the earliest of (i) maturity of the notes, (ii) prepayment of the
notes, or (iii) sale of the Company. The original issue discount of
$4.1 million on this non-interest bearing note at a market interest
rate of 12% will be amortized over the life of the notes.
The new credit facilities contain covenants regarding minimum levels of
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"),
maximum total debt/EBITDA, maximum senior debt to EBITDA, minimum EBITDA to cash
interest, and minimum shareholders' equity. The covenants also include
restrictions on capital expenditures, dividends, and stock repurchases.
Minimum annual maturities adjusted to reflect the July 23, 2001 refinancing are
as follows:
(in thousands)
FISCAL REVOLVER SENIOR NOTES SUB NOTES TOTAL
-------- ------------ --------- --------
2002 -- $ 250 -- $ 250
2003 -- 2,000 -- 2,000
2004 -- 2,000 -- 2,000
2005 $ 14,000 2,000 -- 16,000
2006 -- 2,000 -- 2,000
2007 -- 5,750 -- 5,750
2008 -- -- $ 24,000* 24,000
-------- -------- -------- --------
Total $ 14,000 $ 14,000 $ 24,000 $ 52,000
*includes $8,000 non-interest bearing note issued at an original issue
discount of $4.1 million.
In the event that required debt service exceeds 70% of free cash flow
(EBITDA less capital expenditures and cash taxes paid), the excess of contingent
interest and principal amortization over 70% will be deferred until maturity of
the Senior Notes in June 2006. Contingent interest plus additional principal
payments will be due annually up to 70% of free cash flow.
As part of the refinancing, the Company issued to the Lenders warrants
for non-voting common stock that are convertible into common stock equivalent to
65% of the shares of the Company on a fully diluted basis at a price of 11.3
cents per share. The warrants are non-callable and expire in six years. The
value of the warrants of $2.4 million using the Black-Scholes option pricing
model was credited to additional paid in capital in the second quarter of fiscal
2002. Also in the second quarter of fiscal 2002, the Company recognized an
extraordinary item of $25.0 million representing cancellation of debt income in
connection with the refinancing.
F-9
Below is a comparison of the April 1, 2001 balance sheet with the pro
forma impact of the refinancing and the disposition of the Adult Bedding and
Bath business:
CONDENSED BALANCE SHEET
in millions of dollars Pro forma
April 1, 2001 April 1, 2001
------------- -------------
Current assets $ 40.7 $ 42.5
Assets held for sale 21.7 --
Fixed assets, net 3.9 3.9
Other assets 24.4 24.4
------ ------
Total assets $ 90.7 $ 70.8
====== ======
Accounts payable $ 8.5 $ 6.0
Accrued liabilities 6.5 6.2
Current maturities of long term debt 44.0 0.3
------ ------
Total current liabilities 59.0 12.5
Long term debt 47.7 47.7
Other liabilities 0.8 --
Shareholders' (deficit) equity (16.8) 10.6
------ ------
Total liabilities and shareholders' (deficit) equity $ 90.7 $ 70.8
The Company's notes and the credit facilities contain similar
restrictive covenants requiring the Company to maintain certain ratios of
earnings to fixed charges and of total debt to total capitalization. In
addition, the bank revolving credit facilities contain certain covenants
requiring the Company to maintain minimum levels of shareholders' equity and
certain ratios of total debt to cash flow. The bank facilities also place
restrictions on the amounts the Company may expend on acquisitions and purchases
of treasury stock and currently prohibit the payment of dividends. Other
covenants of these revolving credit facilities require the Company to maintain
certain financial ratios and place restrictions on the amounts the Company may
expend on acquisitions.
On August 31, 2000, the Company concluded a restructuring of its debt.
The agreements extended the maturity of the debt to April 3, 2001 and adjusted
financial and other covenants based on the Company's projections. The
restructured loan covenants limited capital expenditures for fiscal 2001 to $4.4
million, limited the level of advances on factored accounts receivable, required
certain levels of borrowing base assets relative to the debt, and required
certain levels of cash flow on a monthly basis. At certain times during the
year, the Company was not in compliance with certain of these covenants and
obtained amendments of the loan agreements to waive such noncompliance.
Compliance and reporting to the lenders is daily with respect to the level of
factor advances and borrowing base assets, and monthly with respect to other
covenants. In exchange, the Company issued to the Lenders warrants exercisable
for 5% of the Company's issued and outstanding stock exercisable not later than
December 31, 2005. These warrants were cancelled in connection with the July 23,
2001 refinancing. As of August 31, 2000, the interest rate on the credit
facilities was increased by 1% to each bank's base rate plus 2% and on the notes
placed with an insurance company to 11.77%. The margin over Base Rate increased
to 4% in the quarter ended April 1, 2001. Effective April 3, 2001, the Lenders
extended the maturity of the loans to June 30, 2001 and subsequently to August
6, 2001 with a margin over base rate of 1%.
NOTE 7 - INCOME TAXES
The (benefits) provisions for income taxes are summarized as follows:
(in thousands) 2001 2000 1999
-----------------------------------------------------------------------
Current:
Federal $ 64 $ (362) $ (2,866)
State and local (31) 235 (455)
-----------------------------------------------------------------------
Total current 33 (127) (3,321)
-----------------------------------------------------------------------
Deferred:
Federal 0 (3,264) (1,379)
State and local (56) (656) (530)
-----------------------------------------------------------------------
Total deferred (56) (3,920) (1,909)
-----------------------------------------------------------------------
Total benefit $ (23) $ (4,047) $ (5,230)
-----------------------------------------------------------------------
F-10
The tax effects of temporary differences that comprise the deferred tax
liabilities and assets are as follows:
(in thousands) 2001 2000
----------------------------------------------------------------------
Gross deferred income tax
liabilities:
Property, plant and
equipment $ 4,196 $ 9,821
DISC earnings deferral -- 570
Other 482 932
----------------------------------------------------------------------
Total gross deferred income
tax liabilities (4,678) (11,323)
----------------------------------------------------------------------
Gross deferred income tax assets:
Employee benefit accruals 859 1,533
Accounts receivable reserves 486 1,394
Net operating loss carryforward 22,115 16,657
Accrued losses 16,565
Other 496 2,096
----------------------------------------------------------------------
Total gross deferred income
tax assets 40,521 21,680
----------------------------------------------------------------------
Deferred tax asset valuation
allowance (35,867) (10,437)
----------------------------------------------------------------------
Net deferred income tax
liability $ 24 $ 80
----------------------------------------------------------------------
As of April 1, 2001, the Company has federal income tax net operating
loss carryforwards totaling $55.9 million which begin expiring in the year
ending March 2020.
The following reconciles the income tax benefit at the U.S. federal
income tax statutory rate to that in the financial statements:
(in thousands) 2001 2000 1999
--------------------------------------------------------------------------------------
Statutory rate $(24,259) $(11,389) $ (5,473)
Nondeductible
amortization of goodwill $ 286 $ 275 $ 343
State income taxes, net of
Federal income tax benefit $ (2,555) $ (277) $ (650)
Valuation allowance 25,430 7,724
Other 1,075 (380) 550
--------------------------------------------------------------------------------------
Provision for income taxes $ (23) $ (4,047) $ (5,230)
--------------------------------------------------------------------------------------
NOTE 8 - RETIREMENT PLANS
The Company maintains an Employee Stock Ownership Plan, which provides
for annual contributions by the Company at the discretion of the Board of
Directors for the benefit of eligible employees.
Contributions can be made either in cash or in shares of the Company's common
stock. Participation in the Plan is open to all Company employees who are at
least twenty-one years of age and who have been employed by the Company for at
least one year. The Company recognized expense of $76,000, $50,000, and
$480,000, respectively, for its cash contributions to the Plan in fiscal 2001,
2000, and 1999. Effective April 1, 2001, the Employee Stock Ownership Plan was
terminated.
Effective January 1, 1996, the Company established an Employee Savings
Plan under Section 401(k) of the Internal Revenue Code. The plan covers
substantially all employees. Under the Plan, employees generally may elect to
exclude up to 15% of their compensation from amounts subject to income tax as a
salary deferral contribution. The Board of Directors determines each calendar
year the portion, if any, of employee contributions that will be matched by the
Company. Beginning in calendar 1998, the Company has made or will make a
matching contribution to each employee in an amount equal to 100% of the first
2% and 50% of the next 1%
F-11
contributed by the employee. The Company's matching contributions to the Plan
were approximately $553,000, $814,000, and $855,000, respectively, for fiscal
2001, 2000 and 1999.
NOTE 9 - STOCK OPTIONS
The Company accounts for its stock option plans using the intrinsic
value method established by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and its related interpretations.
Accordingly, no compensation cost has been recognized in the Company's financial
statements for its stock based compensation plans. The Company complies with the
disclosure requirements of SFAS No. 123, "Accounting for Stock Based
Compensation", which requires pro forma disclosure regarding net earnings and
earnings per share determined as if the Company had accounted for employee stock
options using the fair value method of that statement.
The Company's 1976 and 1995 Stock Option Plans provide for the grant
of non-qualified stock options to officers and key employees at prices no less
than the market price of the stock on the date of each grant. In addition, the
1995 Stock Option Plan provides for the grant of incentive stock options to
employees and a fixed annual grant of 2,000 non-qualified stock options to each
non-employee director on the day after each year's annual meeting of
shareholders. Through April 1, 2001, non-qualified options covering a total of
54,000 shares have been issued to non-employee directors and no incentive
options have been issued. One-third of the non-qualified options become
exercisable on each of the first three anniversaries of their issuance, except
for the options granted in December 1999 which vest 50% after one year and the
balance after two years. The non-qualified options expire on the fifth
anniversary of their issuance except for the December 1999 options which expire
in ten years.
A total of 5,955,000 shares of common stock have been authorized for
issuance under the Plans. At April 1, 2001, 1,499,280 options were reserved for
future issuance. The options outstanding at April 1, 2001 expire through
September 8, 2010, have a weighted average remaining contractual life of 4.36
years, and include 834,886 options exercisable at April 1, 2001 with a weighted
average exercise price of $8.82.
The following table summarizes stock option activity during each of the most
recent three fiscal years:
Weighted
Number Exercise Price Average
of Shares Per Share Exercise
---------------------------------------------------------------------------------
Options outstanding,
March 29, 1998 1,890,227 $ 7.88 - 21.31 $10.39
Options granted 504,633 5.50 - 14.50 7.99
Options canceled (151,407) 7.88 - 15.63 10.65
Options exercised (329,262) 7.88 - 13.25 10.19
---------------------------------------------------------------------------------
Options outstanding,
March 28, 1999 1,914,191 5.50 - 21.31 9.77
Options granted 569,600 2.31 - 5.88 2.44
Options canceled (312,718) 2.31 - 21.31 9.09
---------------------------------------------------------------------------------
Options outstanding,
April 2, 2000 2,171,073 2.31 - 18.75 7.96
Options granted 487,162 .47 - 2.00 1.17
Options canceled (1,321,274) 1.06 - 15.75 7.05
---------------------------------------------------------------------------------
Options outstanding,
April 1, 2001 1,336,961 $ .47 - 18.75 $ 6.37
---------------------------------------------------------------------------------
F-12
The following table summarizes information about stock options
outstanding and exercisable at April 1, 2001 by range of exercise price:
Weighted Avg. Weighted Avg. Weighted Avg.
Range Number of Remaining Exercise Price Number of Exercise Price
of Exercise Options Contractual of Options Shares of Shares
Prices Outstanding Life Outstanding Exercisable Exercisable
------------------------------------------------------------------------------------------------------------
$ 0.47 - $ 2.31 557,912 8.89 years $ 1.73 128,909 $ 2.31
3.00 - 10.25 588,349 0.99 years 8.64 515,277 8.92
11.50 - 18.75 190,700 1.47 years 12.96 190,700 12.96
--------- -------
1,336,961 834,886
------------------------------------------------------------------------------------------------------------
Option holders may pay the option price of options exercised by
surrendering to the Company shares of the Company's stock that the option holder
has owned for at least six months prior to the date of such exercise. Option
holders may also satisfy their required income tax withholding obligations upon
the exercise of options by requesting the Company to withhold the number of
otherwise issuable shares with a market value equal to such tax withholding
obligation.
The weighted-average grant-date fair value of options granted in 2001,
2000, and 1999, respectively, was $0.56, $2.44, and $6.35 per share. Had
compensation cost for the Company's stock option grants been determined and
recorded as expense at the grant dates, the Company's pro forma net loss and
loss per share would have been as follows:
(in thousands, except per share data) 2001 2000 1999
-------------------------------------------------------------------------------------------
Net loss $ (74,152) $(29,451) $(13,685)
Basic loss per share (8.61) (3.42) (1.59)
Diluted loss per share (8.61) (3.42) (1.59)
-------------------------------------------------------------------------------------------
For purposes of the pro forma disclosure, the fair value of each option
was estimated as of the date of grant using the Black-Scholes option-pricing
model and is amortized to expense ratably as the option vests. The following
table summarizes the assumptions used to value options.
(in percentages, except expected life) 2001 2000 1999
-------------------------------------------------------------------------------
Dividend yield -- 1.59 1.15
Expected volatility 50 32 134
Risk free interest rate 6.1 5.4 4.9
Expected life, years 4.4 4.0 4.0
NOTE 10 - LOSS PER SHARE
Due to the losses in each of fiscal years 2001, 2000, and 1999, Basic
and Diluted Loss per Share are both calculated using the weighted average common
shares outstanding (in thousands) of 8,609, 8,609 and 8,593 for fiscal 2001,
2000 and 1999, respectively. Common stock equivalents of 429,385 related to
warrants held by the Company's lenders are excluded from the fiscal 2001 diluted
loss per common share calculation because such are anti-dilutive.
NOTE 11 - MAJOR CUSTOMERS
The table below indicates customers representing more than 10% of
sales.
Fiscal Year:
2001 2000 1999
Wal-Mart Stores, Inc. 16% 13% 18%
Federated Department Stores 14% 14% *
Toys R Us 13% 11% *
Target Corporation * 11% *
*-Less than 10%.
F-13
NOTE 12 - COMMITMENTS AND CONTINGENCIES
Lease Commitments: At April 1, 2001, the Company's minimum annual rentals under
noncancelable operating leases, principally for manufacturing, warehousing and
office facilities, were as follows:
Fiscal year: (in thousands)
-----------------------------------------------------
2002 $ 2,364
2003 1,180
2004 655
2005 310
2006 272
Thereafter 147
-----------------------------------------------------
$ 4,928
-----------------------------------------------------
Total rent expense was $4.5 million, $6.5 million, and $5.7 million,
respectively, for the years ended April 1, 2001, April 2, 2000 and March 28,
1999.
Certain of the Company's products are manufactured and sold pursuant to
license arrangements that include, among others: Calvin Klein(R), Disney(R)and
Warner Bros.(R). The licensing agreements for the Company's designer brands
generally are for a term at inception of one to six years, and may or may not be
subject to renewal or extension. At April 1, 2001, the Company's minimum royalty
guarantees were as follows:
Fiscal year: (in thousands)
-----------------------------------------------------
2002 $ 7,815
2003 4,023
2004 2,950
-----------------------------------------------------
$14,788
-----------------------------------------------------
The Company's total royalty expense, net of royalty income, was $14.4
million, $15.8 million and $13.4 million, for fiscal 2001, 2000 and 1999,
respectively.
NOTE 13 - SEGMENTS AND RELATED INFORMATION
In 1999, the Company adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company's principal segments
include 1) adult home furnishing and juvenile products and 2) infant products.
The adult home furnishing and juvenile products segment consists of bedroom and
bath products (adult comforters, sheets and towels), throws and juvenile
products (primarily Pillow Buddies(R)). The infant products segment consists of
infant bedding, bibs, and infant soft goods. The Company tracks revenues and
operating profit information for these two business segments.
The Company's manufacturing and distribution operations are also
divided into adult home furnishing and juvenile products and infant products.
The Company's facilities in North Carolina and Kentucky support the adult home
furnishing and juvenile products. The Company's facilities in Louisiana,
California and Mexico support the infant products. Assets, capital expenditures
and depreciation and amortization are tracked for adult home furnishing and
juvenile products as a whole and for infant products.
Financial information attributable to the Company's business segments
for the years ended April 1, 2001, April 2, 2000 and March 28, 1999, is as
follows (in thousands):
Revenues: 2001 2000 1999
--------------------------------------------------------------------------------
Adult home furnishing and
juvenile products $ 150,652 $ 217,998 $ 269,647
--------------------------------------------------------------------------------
Infant products 96,863 101,895 92,424
--------------------------------------------------------------------------------
$ 247,515 $ 319,893 $ 362,071
--------------------------------------------------------------------------------
Operating loss: 2001 2000 1999
--------------------------------------------------------------------------------
Adult home furnishing
and juvenile products $ (62,671) $ (21,477) $ (9,455)
--------------------------------------------------------------------------------
Infant products 3,116 1,919 2,429
--------------------------------------------------------------------------------
$ (59,555) $ (19,558) $ (7,026)
--------------------------------------------------------------------------------
F-14
Assets: 2001 2000 1999
--------------------------------------------------------------------------------
Adult home furnishing and
juvenile products $ 30,436 $ 143,592 $ 191,407
--------------------------------------------------------------------------------
Infant products 60,242 71,412 73,444
--------------------------------------------------------------------------------
$215,004 $ 264,851 $ 90,678
--------------------------------------------------------------------------------
Capital expenditures: 2001 2000 1999
--------------------------------------------------------------------------------
Adult home furnishing and
juvenile products $ 949 $ 6,692 $ 19,777
--------------------------------------------------------------------------------
Infant products 407 1,271 1,275
--------------------------------------------------------------------------------
$ 1,356 $ 7,963 $ 21,052
--------------------------------------------------------------------------------
Depreciation and amortization: 2001 2000 1999
--------------------------------------------------------------------------------
Adult home furnishing and
juvenile products $ 8,583 $ 11,473 $ 10,910
--------------------------------------------------------------------------------
Infant products 1,890 1,861 1,740
--------------------------------------------------------------------------------
$ 10,473 $ 13,334 $ 12,650
--------------------------------------------------------------------------------
The key features used by decision makers are the level of operating
income relative to revenues and assets.
Revenues for individual product groups within these business segments
are summarized below. The Company's facilities in Georgia, North Carolina, New
Hampshire and Kentucky support adult home furnishing and juvenile products.
(in thousands) 2001 2000 1999
--------------------------------------------------------------------------------
Bedroom and bath products $ 90,500 $ 135,600 $ 145,500
Throws 55,300 71,300 98,200
Infant and juvenile products 101,600 112,900 117,600
Other revenues 115 93 771
--------------------------------------------------------------------------------
$247,515 $ 319,893 $ 362,071
--------------------------------------------------------------------------------
NOTE 14 - SUBSEQUENT EVENTS
On June 14, 2001, the Company completed the sale of the Timberlake,
North Carolina plant. Proceeds of $8.0 million were used to reduce debt. On July
17, 2001, the Roxboro, North Carolina outlet store was sold and the proceeds of
$0.5 million were used to reduce debt. On July 23, 2001, the Adult Bedding and
Bath business was sold and the proceeds of $8.5 million were used to reduce
debt. Effective July 23, 2001, as described in Note 6, the Company completed a
refinancing of its debt.
F-15
CROWN CRAFTS, INC. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
SELECTED QUARTERLY FINANCIAL INFORMATION
UNAUDITED QUARTERLY FINANCIAL INFORMATION
in thousands, except per share
amounts
First Second Third Fourth
Quarter Quarter Quarter Quarter
FISCAL YEAR ENDED APRIL 1,
2001:
Net sales $ 58,194 $ 82,175 $ 67,064 $ 40,082
Gross profit 4,447 10,180 11,743 (7,828)
Net loss (10,886) (11,408) (5,872) (45,421)
Basic loss per share (1.26) (1.33) (0.68) (5.28)
Diluted loss per share (1.26) (1.33) (0.68) (5.28)
FISCAL YEAR ENDED APRIL 2,
2000:
Net sales $ 65,787 $ 84,162 $ 91,001 $ 78,943
Gross profit 8,945 13,665 14,592 (2,046)
Net loss (3,827) (1,817) (1,667) (21,837)
Basic loss per share (0.44) (0.21) (0.19) (2.55)
Diluted loss per share (0.44) (0.21) (0.19) (2.55)
Net loss, basic loss per share and diluted loss per share for the
fourth quarter of the fiscal year ended April 2, 2000 were increased by $3.0
million, $0.35 and $0.35, respectively, as a result of certain inventory
adjustments, including differences between the books and the physical inventory.
Net loss, basic loss per share and diluted loss per share for the
fourth quarter of the fiscal year ended April 1, 2001 were increased by $24.2
million, $2.81 and $2.81, respectively, as a result of the provision for
impairment and loss on sale of inventory related to the Adult Bedding and Bath
business. Further, net loss, basic loss and diluted loss per share for the
fourth quarter of the fiscal year ended April 1, 2001 were increased by $12.4
million, $1.44 and $1.44, respectively, due to a provision for impairment on
abandoned computer systems.
F-16