##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended October 2, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from___to___
 Commission File No. 1-7604
 CROWN CRAFTS, INC.
 
  Delaware
    
    58-0678148(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 916 South Burnside Avenue, Gonzales, Louisiana 70737(Address of principal executive offices)
 (225) 647-9100(Registrants telephone number, including area code)
  þ o
  o þ
  o þ




---



##### Table of Contents



October 2, 2005
    
    
    April 3, 2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    426
    
    
    $
    955Accounts receivable (net of allowances of $1,767 at
October 2, 2005 and$1,411 at April 3, 2005)Due from factor
    
    
    10,795
    
    
    
    13,258Other
    
    
    3,475
    
    
    
    1,110Inventories, net
    
    
    12,099
    
    
    
    12,544Prepaid expense
    
    
    1,004
    
    
    
    1,450Total current assets
    
    
    27,799
    
    
    
    29,317Property, plant and equipment  at cost:Land, buildings and improvements
    
    
    1,385
    
    
    
    1,447Machinery and equipment
    
    
    2,943
    
    
    
    2,657Furniture and fixtures
    
    
    650
    
    
    
    6614,978
    
    
    
    4,765Less accumulated depreciation
    
    
    3,298
    
    
    
    3,179Property, plant and equipment  net
    
    
    1,680
    
    
    
    1,586Other assets:Goodwill, net
    
    
    22,974
    
    
    
    22,974Other
    
    
    262
    
    
    
    247Total other assets
    
    
    23,236
    
    
    
    23,221Total Assets
    
    $
    52,715
    
    
    $
    54,124LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    5,149
    
    
    $
    3,729Accrued wages and benefits
    
    
    598
    
    
    
    669Accrued royalties
    
    
    1,546
    
    
    
    1,051Other accrued liabilities
    
    
    130
    
    
    
    398Current maturities of long-term debt
    
    
    18
    
    
    
    2,317Total current liabilities
    
    
    7,441
    
    
    
    8,164Non-current liabilities:Long-term debt
    
    
    23,516
    
    
    
    25,085Total non-current liabilities
    
    
    23,516
    
    
    
    25,085Commitments and contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock  par value $0.01 per share, 74,000,000 shares
authorized, 9,505,937 shares outstanding
    
    
    95
    
    
    
    95Additional paid-in capital
    
    
    38,244
    
    
    
    38,244Accumulated deficit
    
    
    (16,581
    )
    
    
    (17,464
    )Total shareholders equity
    
    
    21,758
    
    
    
    20,875Total Liabilities and Shareholders Equity
    
    $
    52,715
    
    
    $
    54,124
 See notes to unaudited condensed consolidated financial statements.
 1




---



##### Table of Contents



Three Months Ended
    
    
    Six Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    21,285
    
    
    $
    23,025
    
    
    $
    34,944
    
    
    $
    39,933Cost of products sold
    
    
    16,676
    
    
    
    18,386
    
    
    
    27,368
    
    
    
    31,820Gross profit
    
    
    4,609
    
    
    
    4,639
    
    
    
    7,576
    
    
    
    8,113Marketing and administrative expenses
    
    
    2,596
    
    
    
    2,760
    
    
    
    5,064
    
    
    
    5,383Income from operations
    
    
    2,013
    
    
    
    1,879
    
    
    
    2,512
    
    
    
    2,730Other income (expense):Interest expense
    
    
    (740
    )
    
    
    (937
    )
    
    
    (1,541
    )
    
    
    (1,882
    )Other  net
    
    
    (25
    )
    
    
    (10
    )
    
    
    17
    
    
    
    5Income before income taxes
    
    
    1,248
    
    
    
    932
    
    
    
    988
    
    
    
    853Income tax expense
    
    
    97
    
    
    
    88
    
    
    
    105
    
    
    
    112Net income
    
    $
    1,151
    
    
    $
    844
    
    
    $
    883
    
    
    $
    741Basic income per share
    
    $
    0.12
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.08Diluted income per share
    
    $
    0.05
    
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.03Weighted average shares outstanding  basic
    
    
    9,506
    
    
    
    9,505
    
    
    
    9,506
    
    
    
    9,505Weighted average shares outstanding  diluted
    
    
    21,441
    
    
    
    22,260
    
    
    
    21,386
    
    
    
    22,250
 See notes to unaudited condensed consolidated financial statements.
 2




---



##### Table of Contents



October 2,
    
    
    September 26,2005
    
    
    2004Operating activities:Net income
    
    $
    883
    
    
    $
    741Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation of property, plant and equipment
    
    
    230
    
    
    
    250Loss (gain) on sale of property, plant and equipment
    
    
    14
    
    
    
    (2
    )Discount accretion
    
    
    372
    
    
    
    331Changes in assets and liabilitiesAccounts receivable
    
    
    98
    
    
    
    5,461Inventories, net
    
    
    445
    
    
    
    (4,634
    )Prepaid expenses
    
    
    446
    
    
    
    598Other assets
    
    
    (15
    )
    
    
    (3
    )Accounts payable
    
    
    1,420
    
    
    
    (267
    )Accrued liabilities
    
    
    424
    
    
    
    215Net cash provided by operating activities
    
    
    4,317
    
    
    
    2,690Investing activities:Capital expenditures
    
    
    (339
    )
    
    
    (93
    )Proceeds from disposition of assets
    
    
    1
    
    
    
    6Net cash (used in) investing activities
    
    
    (338
    )
    
    
    (87
    )Financing activities:Payment of long-term borrowing
    
    
    (12,300
    )
    
    
    (10,642
    )Borrowings against line of credit
    
    
    7,792
    
    
    
    8,140Net cash (used in) financing activities
    
    
    (4,508
    )
    
    
    (2,502
    )Net (decrease) increase in cash and cash equivalents
    
    
    (529
    )
    
    
    101Cash and cash equivalents at beginning of period
    
    
    955
    
    
    
    7Cash and cash equivalents at end of period
    
    $
    426
    
    
    $
    108Supplemental cash flow information:Income taxes received
    
    $
    (33
    )
    
    $
    Interest paid
    
    
    1,159
    
    
    
    1,335Accrued interest converted to long-term debt
    
    
    268
    
    
    
    268
 See notes to unaudited condensed consolidated financial statements.
 3




---



##### Table of Contents



1.
    
    Basis of Presentation:The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of
America applicable to interim financial information and the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the information
and disclosures required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, such interim
consolidated financial statements contain all adjustments necessary to present fairly the
financial position of Crown Crafts, Inc. (the Company) as of October 2, 2005 and the results
of its operations and cash flows for the periods presented. Such adjustments include normal
recurring accruals. Operating results for the three and six-month periods ended October 2,
2005 are not necessarily indicative of the results that may be expected for the year ending
April 2, 2006. For further information, refer to the consolidated financial statements and
footnotes thereto included in the annual report on Form 10-K for the year ended April 3, 2005
of the Company.
 Revenue Recognition:
 Use of Estimates:
 Segment and Related Information:
 Impairment of Long-lived Assets, Identifiable Intangibles and Goodwill:
 Goodwill and Other Intangible Assets
 Provision for Income Taxes:
 4




---



##### Table of Contents



Allowances Against Accounts Receivable:
   Royalty Payments:
 Stock-Based Compensation: Accounting for Stock Issued to Employees Accounting for Stock Based-Compensation Accounting for Stock-Based Compensation  Transition and Disclosure
 Share-Based Payment, an Amendment of FASB
Statement No. 123
  5




---



##### Table of Contents



Three months ended
    
    
    Six months endedOctober 2, 2005
    
    
    September 26, 2004
    
    
    October 2, 2005
    
    
    September 26, 2004Net income, as reported
    
    $
    1,151
    
    
    $
    844
    
    
    $
    883
    
    
    $
    741Deduct: Total
stock-based employee compensation expense determined under the fair value based method for all awards
    
    
    (11
    )
    
    
    (22
    )
    
    
    (22
    )
    
    
    (44
    )Pro forma net income
    
    $
    1,140
    
    
    $
    822
    
    
    $
    861
    
    
    $
    697Income per share:Basic  as reported
    
    $
    0.12
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.08Basic  pro forma
    
    $
    0.12
    
    
    $
    0.09
    
    
    $
    0.09
    
    
    $
    0.07Diluted  as reported
    
    $
    0.05
    
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.03Diluted  pro forma
    
    $
    0.05
    
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.03
 2.
    
    Inventory:Major classes of inventory were as follows (in thousands):
 October 2, 2005
    
    
    April 3, 2005Raw Materials
    
    $
    476
    
    
    $
    633Work in Process
    
    
    133
    
    
    
    210Finished Goods
    
    
    11,490
    
    
    
    11,701$
    12,099
    
    
    $
    12,544
  3.
    
    Financing Arrangements
 Factoring Agreement:
 Notes Payable and Other Credit Facilities
 October 2,
    
    
    April 3,2005
    
    
    2005Senior notes and senior subordinated notes
    
    $
    16,030
    
    
    $
    20,538Floating rate revolving credit facilities
    
    
    
    
    
    
    Non-interest bearing notes
    
    
    9,077
    
    
    
    8,809Original issue discount
    
    
    (1,573
    )
    
    
    (1,945
    )23,534
    
    
    
    27,402Less current maturities
    
    
    18
    
    
    
    2,317$
    23,516
    
    
    $
    25,085
 6




---



##### Table of Contents



Revolving Credit
 Senior Notes
 Senior Subordinated Notes
    Sub
    
    
    PIKFiscal
    
    Revolver
    
    
    Notes
    
    
    Notes
    
    
    Other
    
    
    Total2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    102007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    182008
    
    
    
    
    
    
    24,000
    *
    
    
    1,077
    
    
    
    2
    
    
    
    25,079Total
    
    $
    
    
    
    $
    24,000
    
    
    $
    1,077
    
    
    $
    30
    
    
    $
    25,107
 
   7




---



TABLE OF CONTENTS  ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4  CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONItem 1   Legal ProceedingsItem 2   Unregistered Sales of Equity Securities and Use of ProceedsItem 3   Defaults Upon Senior SecuritiesItem 4   Submission of Matters to a Vote of Security HoldersItem 5   Other InformationItem 6   ExhibitsSIGNATURESIndex to ExhibitsCertification by the CEO Pursuant to Rule 13a-14(a)/15d-14(a)Certification by the CFO Pursuant to Rule 13a-14(a)/15d-14(a)Certification by the CEO Pursuant to Section 1350Certification by the CFO Pursuant to Section 1350    Table of Contents  
 
      Three months ended
    
    
    Six months endedOct. 2, 2005
    
    
    Sept. 26, 2004
    
    
    $ change
    
    
    % change
    
    
    Oct. 2, 2005
    
    
    Sept. 26, 2004
    
    
    $ change
    
    
    % changeDollars in thousands
    
    
    Dollars in thousandsNet Sales by CategoryBedding, Blankets
and Accessories
    
    $
    14,786
    
    
    $
    16,300
    
    
    $
    (1,514
    )
    
    
    -9.3
    %
    
    $
    23,770
    
    
    $
    27,360
    
    
    $
    (3,590
    )
    
    
    -13.1
    %Bibs and Bath
    
    
    5,770
    
    
    
    5,880
    
    
    
    (110
    )
    
    
    -1.9
    %
    
    
    9,929
    
    
    
    11,214
    
    
    
    (1,285
    )
    
    
    -11.5
    %Handwoven Products
    
    
    729
    
    
    
    845
    
    
    
    (116
    )
    
    
    -13.7
    %
    
    
    1,245
    
    
    
    1,359
    
    
    
    (114
    )
    
    
    -8.4
    %Total Net Sales
    
    
    21,285
    
    
    
    23,025
    
    
    
    (1,740
    )
    
    
    -7.6
    %
    
    
    34,944
    
    
    
    39,933
    
    
    
    (4,989
    )
    
    
    -12.5
    %Cost of Products Sold
    
    
    16,676
    
    
    
    18,386
    
    
    
    (1,710
    )
    
    
    -9.3
    %
    
    
    27,368
    
    
    
    31,820
    
    
    
    (4,452
    )
    
    
    -14.0
    %Gross Profit
    
    
    4,609
    
    
    
    4,639
    
    
    
    (30
    )
    
    
    -0.6
    %
    
    
    7,576
    
    
    
    8,113
    
    
    
    (537
    )
    
    
    -6.6
    %% of Net Sales
    
    
    21.7
    %
    
    
    20.1
    %
    
    
    
    
    
    
    
    
    
    
    21.7
    %
    
    
    20.3
    %Marketing and Administrative Expenses
    
    
    2,596
    
    
    
    2,760
    
    
    
    (164
    )
    
    
    -5.9
    %
    
    
    5,064
    
    
    
    5,383
    
    
    
    (319
    )
    
    
    -5.9
    %% of Net Sales
    
    
    12.2
    %
    
    
    12.0
    %
    
    
    
    
    
    
    
    
    
    
    14.5
    %
    
    
    13.5
    %Interest Expense
    
    
    740
    
    
    
    937
    
    
    
    (197
    )
    
    
    -21.0
    %
    
    
    1,541
    
    
    
    1,882
    
    
    
    (341
    )
    
    
    -18.1
    %Other  net
    
    
    25
    
    
    
    10
    
    
    
    15
    
    
    
    150.0
    %
    
    
    (17
    )
    
    
    (5
    )
    
    
    (12
    )
    
    
    240.0
    %Income Tax Expense
    
    
    97
    
    
    
    88
    
    
    
    9
    
    
    
    10.2
    %
    
    
    105
    
    
    
    112
    
    
    
    (7
    )
    
    
    -6.3
    %Net Income
    
    
    1,151
    
    
    
    844
    
    
    
    307
    
    
    
    36.4
    %
    
    
    883
    
    
    
    741
    
    
    
    142
    
    
    
    19.2
    %% of Net Sales
    
    
    5.4
    %
    
    
    3.7
    %
    
    
    
    
    
    
    
    
    
    
    2.5
    %
    
    
    1.9
    %
 8




---



##### Table of Contents



Net Sales:
   Gross Profit:
 Marketing and Administrative Expenses
 Interest Expense:
   9




---



##### Table of Contents



10




---



##### Table of Contents



Exhibits31.1
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Financial Officer32.1
    
    Section 1350 Certification by the Companys Chief Executive Officer32.2
    
    Section 1350 Certification by the Companys Chief Financial Officer
 
   CROWN CRAFTS, INC.Date: November 15, 2005
    
    
    
    /s/ Amy Vidrine SamsonAMY VIDRINE SAMSONChief Financial Officer(duly authorized signatory andPrincipal Financial and AccountingOfficer)
 11




---



##### Table of Contents



Index to Exhibits
 ExhibitNumber
    
    Description31.1
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Financial Officer32.1
    
    Section 1350 Certification by the Companys Chief Executive Officer32.2
    
    Section 1350 Certification by the Companys Chief Financial Officer
 12