##### Table of Contents



UNITED STATES
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 June 28, 2009
 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
  (225) 647-9100
  þ o
 o o
  Large accelerated filer o
    
    
    
    Accelerated filer o
    
    
    
    Non-Accelerated filer o
    
    
    
    Smaller Reporting Company þ(Do not check if a smaller reporting company)
 o þ




---



TABLE OF CONTENTS  PART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSCONDENSED CONSOLIDATED BALANCE SHEETSUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOMEUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 1A. RISK FACTORSITEM 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. EXHIBITSSIGNATUREIndex to ExhibitsExhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2    Table of Contents  
  
 ITEM 1.
    
    FINANCIAL STATEMENTS
  
    June 28, 2009
    
    
    March 29, 2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    14,883
    
    
    $
    15,249Accounts receivable (net of allowances of $1,442 at June 28, 2009 and $1,581
at March 29, 2009):Due from factor
    
    
    12,317
    
    
    
    17,341Other
    
    
    1,222
    
    
    
    1,613Inventories, net
    
    
    16,289
    
    
    
    11,751Prepaid expenses
    
    
    842
    
    
    
    1,070Temporary investments  restricted
    
    
    500
    
    
    
    Assets held for sale
    
    
    550
    
    
    
    550Deferred income taxes
    
    
    991
    
    
    
    921Total current assets
    
    
    47,594
    
    
    
    48,495Property, plant and equipment  at cost:Vehicle
    
    
    44
    
    
    
    44Land, buildings and improvements
    
    
    205
    
    
    
    205Machinery and equipment
    
    
    2,546
    
    
    
    2,476Furniture and fixtures
    
    
    765
    
    
    
    7653,560
    
    
    
    3,490Less accumulated depreciation
    
    
    2,890
    
    
    
    2,816Property, plant and equipment  net
    
    
    670
    
    
    
    674Other assets:Intangible assets, net
    
    
    5,081
    
    
    
    5,515Deferred income taxes
    
    
    1,806
    
    
    
    1,655Other
    
    
    188
    
    
    
    188Total other assets
    
    
    7,075
    
    
    
    7,358Total Assets
    
    $
    55,339
    
    
    $
    56,527LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    8,316
    
    
    $
    6,118Accrued wages and benefits
    
    
    1,250
    
    
    
    894Accrued royalties
    
    
    1,230
    
    
    
    1,056Other accrued liabilities
    
    
    656
    
    
    
    813Current maturities of long-term debt
    
    
    1,042
    
    
    
    1,667Total current liabilities
    
    
    12,494
    
    
    
    10,548Non-current liabilities:Long-term debt
    
    
    19,718
    
    
    
    23,568Commitments and contingencies
    
    
    
    
    
    
    Shareholders equity:Preferred stock  $0.01 par value per share; Authorized 1,000,000 shares; No
shares issued at June 28, 2009 and March 29, 2009
    
    
    
    
    
    
    Common stock  $0.01 par value per share; Authorized 74,000,000 shares;
Issued 10,098,441 shares at June 28, 2009 and March 29, 2009
    
    
    101
    
    
    
    101Additional paid-in capital
    
    
    40,173
    
    
    
    39,995Treasury stock  at cost  889,051 shares at June 28, 2009 and March 29, 2009
    
    
    (3,056
    )
    
    
    (3,056
    )Accumulated deficit
    
    
    (14,091
    )
    
    
    (14,629
    )Total shareholders equity
    
    
    23,127
    
    
    
    22,411Total Liabilities and Shareholders Equity
    
    $
    55,339
    
    
    $
    56,527
 See notes to unaudited condensed consolidated financial statements.
  1




---



##### Table of Contents



Three Months EndedJune 28, 2009
    
    
    June 29, 2008Net sales
    
    $
    17,735
    
    
    $
    19,755Cost of products sold
    
    
    13,760
    
    
    
    15,517Gross profit
    
    
    3,975
    
    
    
    4,238Marketing and administrative expenses
    
    
    2,886
    
    
    
    2,906Income from operations
    
    
    1,089
    
    
    
    1,332Other income (expense):Interest and amortization of debt discount and expense
    
    
    (196
    )
    
    
    (327
    )Other  net
    
    
    6
    
    
    
    12Income before income tax expense
    
    
    899
    
    
    
    1,017Income tax expense
    
    
    340
    
    
    
    392Income from continuing operations
    
    
    559
    
    
    
    625Loss from discontinued operations  net of income taxes
    
    
    (21
    )
    
    
    (6
    )Net income
    
    $
    538
    
    
    $
    619Weighted average shares
outstanding  basic
    
    
    9,209
    
    
    
    9,415Weighted average shares
outstanding  diluted
    
    
    9,379
    
    
    
    9,677Basic earnings per share:Income from continuing operations
    
    $
    0.06
    
    
    $
    0.07Loss from discontinued operations
    
    
    
    
    
    
    Total basic earnings per share
    
    $
    0.06
    
    
    $
    0.07Diluted earnings per share:Income from continuing operations
    
    $
    0.06
    
    
    $
    0.06Loss from discontinued operations
    
    
    
    
    
    
    Total diluted earnings per share
    
    $
    0.06
    
    
    $
    0.06
 See notes to unaudited condensed consolidated financial statements.
  2




---



##### Table of Contents



Three Months EndedJune 28, 2009
    
    
    June 29, 2008Operating activities:Net income
    
    $
    538
    
    
    $
    619Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation of property, plant and equipment
    
    
    73
    
    
    
    88Amortization of intangibles
    
    
    434
    
    
    
    434Deferred income taxes
    
    
    (221
    )
    
    
    (240
    )Loss on sale of property, plant and equipment
    
    
    
    
    
    
    1Discount accretion
    
    
    64
    
    
    
    59Stock-based compensation
    
    
    178
    
    
    
    165Changes in assets and liabilities:Accounts receivable
    
    
    5,415
    
    
    
    2,527Inventories, net
    
    
    (4,538
    )
    
    
    (4,069
    )Prepaid expenses
    
    
    228
    
    
    
    133Other assets
    
    
    
    
    
    
    (57
    )Accounts payable
    
    
    2,198
    
    
    
    2,693Accrued liabilities
    
    
    373
    
    
    
    650Net cash provided by operating activities
    
    
    4,742
    
    
    
    3,003Investing activities:Capital expenditures
    
    
    (69
    )
    
    
    (72
    )Purchase of temporary investments
    
    
    (500
    )
    
    
    Net cash used in investing activities
    
    
    (569
    )
    
    
    (72
    )Financing activities:Payments on long-term debt
    
    
    (625
    )
    
    
    (629
    )(Repayments) borrowings under revolving line of credit, net
    
    
    (3,914
    )
    
    
    264Purchase of treasury stock
    
    
    
    
    
    
    (422
    )Net cash used in financing activities
    
    
    (4,539
    )
    
    
    (787
    )Net (decrease) increase in cash and cash equivalents
    
    
    (366
    )
    
    
    2,144Cash and cash equivalents at beginning of period
    
    
    15,249
    
    
    
    7,930Cash and cash equivalents at end of period
    
    $
    14,883
    
    
    $
    10,074Supplemental cash flow information:Income taxes paid
    
    $
    758
    
    
    $
    602Interest paid
    
    
    127
    
    
    
    213
 See notes to unaudited condensed consolidated financial statements.
  3




---



##### Table of Contents



Note 1  Summary of Significant Accounting Policies
 Basis of Presentation:
 Use of Estimates:
 Cash and Cash Equivalents:
 Financial Instruments:
 
    
    Cash and cash equivalents, accounts receivable and accounts payable  For those
short-term instruments, the carrying value is a reasonable estimate of fair value.
 
    
    Long-term debt  The carrying value of the Companys long-term debt approximates
fair value because interest rates under the Companys borrowings are variable, based on
prevailing market rates.
 Provisions for Income Taxes:
 Accounting for Uncertainty in Income Taxes  an Interpretation of FASB Statement of Financial
Standards No. 109
  4




---



##### Table of Contents



Segment and Related Information:
 Revenue Recognition:
 Allowances Against Accounts Receivable
 , Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products)
   Depreciation and Amortization:
 Valuation of Long-lived and Identifiable Intangible Assets:
 Royalty Payments:
 Earnings Per Share: Earnings per Share
  5




---



##### Table of Contents



Three-Months EndedJune 28, 2009
    
    
    June 29, 2008(Amounts in thousands, except per share data)Income from continuing operations
    
    $
    559
    
    
    $
    625Loss from discontinued operations
    
    
    (21
    )
    
    
    (6
    )Net income, basic and diluted
    
    $
    538
    
    
    $
    619Weighted average number of shares outstandingBasic
    
    
    9,209
    
    
    
    9,415Effect of dilutive securities
    
    
    170
    
    
    
    262Diluted
    
    
    9,379
    
    
    
    9,677Earnings per common shareBasicContinuing operations
    
    $
    0.06
    
    
    $
    0.07Discontinued operations
    
    
    
    
    
    
    Total
    
    $
    0.06
    
    
    $
    0.07Earnings per common shareDilutedContinuing operations
    
    $
    0.06
    
    
    $
    0.06Discontinued operations
    
    
    
    
    
    
    Total
    
    $
    0.06
    
    
    $
    0.06
 Recently Issued Accounting Standards: Fair Value Measurements ,
 The Fair Value Option for Financial Assets
and Financial Liabilities
 Business Combinations
  6




---



##### Table of Contents



Subsequent Events
 The FASB Accounting Standards Codification
(Codification) and the Hierarchy of Generally Accepted Accounting Principles
 Note 2  Temporary Investments  Restricted
  Note 3  Stock-based Compensation
   Share-Based Payment
   7




---



##### Table of Contents



Stock Options:
 Weighted-Average
    
    
    Number of OptionsExercise Price
    
    
    OutstandingOutstanding at March 29, 2009
    
    $
    2.54
    
    
    
    819,831Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (0.53
    )
    
    
    (3,500
    )Outstanding at June 28, 2009
    
    $
    2.55
    
    
    
    816,331Exercisable at June 28, 2009
    
    $
    2.26
    
    
    
    661,331
  Three-month period ended June 28, 2009
    
    
    Three-month period ended June 29, 2008Cost of
    
    
    Marketing &
    
    
    
    
    
    
    Cost of
    
    
    Marketing &Products
    
    
    Administrative
    
    
    Total
    
    
    Products
    
    
    Administrative
    
    
    TotalSold
    
    
    Expenses
    
    
    Expense
    
    
    Sold
    
    
    Expenses
    
    
    ExpenseOptions granted in fiscal year 2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11
    
    
    $
    37
    
    
    $
    48Options granted in fiscal year 2008
    
    
    9
    
    
    
    22
    
    
    
    31
    
    
    
    9
    
    
    
    23
    
    
    
    32Options granted in fiscal year 2009
    
    
    15
    
    
    
    44
    
    
    
    59
    
    
    
    3
    
    
    
    7
    
    
    
    10Unvested options at April 3, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Total stock option compensation
    
    $
    24
    
    
    $
    66
    
    
    $
    90
    
    
    $
    23
    
    
    $
    68
    
    
    $
    91
 Non-vested Stock:
    Note 4  Inventories
  June 28, 2009
    
    
    March 29, 2009Raw Materials
    
    $
    33
    
    
    $
    30Finished Goods
    
    
    16,256
    
    
    
    11,721Total inventory
    
    $
    16,289
    
    
    $
    11,751
   8




---



##### Table of Contents



Note 5  Financing Arrangements
 Factoring Agreement:
 Notes Payable and Other Credit Facilities:
 June 28, 2009
    
    
    March 29, 2009Revolving line of credit
    
    $
    16,148
    
    
    $
    20,062Term loan
    
    
    1,042
    
    
    
    1,667Non-interest bearing notes
    
    
    4,000
    
    
    
    4,000Original issue discount
    
    
    (430
    )
    
    
    (494
    )20,760
    
    
    
    25,235Less current maturities
    
    
    1,042
    
    
    
    1,667$
    19,718
    
    
    $
    23,568
  Revolving Line of Credit
  Term Loan
 Subordinated Notes
  Fiscal Year
    
    Revolver
    
    
    Term Loan
    
    
    Sub Notes
    
    
    Total2010
    
    $
    
    
    
    $
    1,042
    
    
    $
    
    
    
    $
    1,0422011
    
    
    16,148
    
    
    
    
    
    
    
    2,000
    
    
    
    18,1482012
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000Total
    
    $
    16,148
    
    
    $
    1,042
    
    
    $
    4,000
    
    
    $
    21,190
  9




---



##### Table of Contents



Note 6  Goodwill and Other Intangible Assets
 Goodwill:
 Other Intangible Assets:
  EstimatedCarrying
    
    
    Useful
    
    
    Accumulated
    
    
    AmortizationAmount
    
    
    Life
    
    
    Amortization
    
    
    ExpenseSprings acquisition:Licenses & existing designs
    
    $
    1,655
    
    
    2 years
    
    $
    1,379
    
    
    $
    207Licenses & future designs
    
    
    1,847
    
    
    4 years
    
    
    769
    
    
    
    115Non-compete
    
    
    115
    
    
    4 years
    
    
    48
    
    
    
    7Customer relationships
    
    
    3,759
    
    
    10 years
    
    
    633
    
    
    
    95Total Springs acquisition
    
    
    7,376
    
    
    
    
    
    
    
    2,829
    
    
    
    424Other acquired intangible assets
    
    
    600
    
    
    15 years
    
    
    129
    
    
    
    9Other intangible assets
    
    
    81
    
    
    10 years
    
    
    18
    
    
    
    1Total other intangible assets
    
    $
    8,057
    
    
    
    
    
    
    $
    2,976
    
    
    $
    434
 Note 7  Discontinued Operations
  Note 9  Subsequent Events
  Acquisition: ® ®
   10




---



##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        Three-Month Period EndedJune 28, 2009
    
    
    June 29, 2008
    
    
    Change
    
    
    ChangeNet sales by categoryBedding, blankets and accessories
    
    $
    14,573
    
    
    $
    16,307
    
    
    $
    (1,734
    )
    
    
    -10.6
    %Bibs and bath
    
    
    3,162
    
    
    
    3,448
    
    
    
    (286
    )
    
    
    -8.3
    %Total net sales
    
    
    17,735
    
    
    
    19,755
    
    
    
    (2,020
    )
    
    
    -10.2
    %Cost of products sold
    
    
    13,760
    
    
    
    15,517
    
    
    
    (1,757
    )
    
    
    -11.3
    %Gross profit
    
    
    3,975
    
    
    
    4,238
    
    
    
    (263
    )
    
    
    -6.2
    %% of net sales
    
    
    22.4
    %
    
    
    21.5
    %Marketing and administrative expenses
    
    
    2,886
    
    
    
    2,906
    
    
    
    (20
    )
    
    
    -0.7
    %% of net sales
    
    
    16.3
    %
    
    
    14.7
    %Interest expense
    
    
    196
    
    
    
    327
    
    
    
    (131
    )
    
    
    -40.0
    %Other income
    
    
    6
    
    
    
    12
    
    
    
    (6
    )
    
    
    -50.0
    %Income tax expense
    
    
    340
    
    
    
    392
    
    
    
    (52
    )
    
    
    -13.3
    %Income from continuing operations after taxes
    
    
    559
    
    
    
    625
    
    
    
    (66
    )
    
    
    -10.6
    %Discontinued operations  net of taxes
    
    
    (21
    )
    
    
    (6
    )
    
    
    (15
    )
    
    
    250.0
    %Net income
    
    
    538
    
    
    
    619
    
    
    
    (81
    )
    
    
    -13.1
    %% of net sales
    
    
    3.0
    %
    
    
    3.1
    %
  11




---



##### Table of Contents



Net Sales:
  Gross Profit:
 Marketing and Administrative Expenses:
 Interest Expense:
       12




---



##### Table of Contents



ITEM 4.
    
    CONTROLS AND PROCEDURES
   
  
 ITEM 1.
    
    LEGAL PROCEEDINGS
   13




---



##### Table of Contents



ITEM 1A.
    
    RISK FACTORS
  The Companys factor and primary lender has disclosed that there is substantial doubt
about its ability to continue as a going concern.
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5.
    
    OTHER INFORMATION
  
 ITEM 6.
    
    EXHIBITS
  ExhibitNo.
    
    Exhibit2.1
    
    
    Asset Purchase Agreement dated as of July 2, 2009 by and among Hamco., Inc., Neat
Solutions, Inc. and each of the shareholders of Neat Solutions, Inc. (1)4.1
    
    
    Amendment No. 3 to Amended and Restated Rights Agreement dated as of April 14,
2009 between the Company and Computershare Trust Company, N.A. (2)10.1
    
    
    Third Amendment to Financing Agreement dated as of July 2, 2009 by and among the
Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts Infant Products, Inc.
and The CIT Group/Commercial Services, Inc. (1)31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Executive Officer (3)31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Financial Officer (3)32.1
    
    
    Section 1350 Certification by the Companys Chief Executive Officer (3)32.2
    
    
    Section 1350 Certification by the Companys Chief Financial Officer (3)
 (1)
    
    Incorporated herein by reference to Registrants Current Report on Form 8-K
dated July 6, 2009.(2)
    
    Incorporated herein by reference to Registrants Current Report on Form 8-K
dated April 16, 2009.(3)
    
    Filed herewith.  14




---



##### Table of Contents



CROWN CRAFTS, INC.Date:  August 12, 2009
    /s/ Olivia W. ElliottOLIVIA W. ELLIOTTChief Financial Officer
(Principal Financial
Officer and Principal
Accounting Officer) 
 Index to Exhibits
 Exhibit No.
    
    Exhibit2.1
    
    
    Asset Purchase Agreement dated as of July 2, 2009 by and among Hamco., Inc., Neat
Solutions, Inc. and each of the shareholders of Neat Solutions, Inc. (1)4.1
    
    
    Amendment No. 3 to Amended and Restated Rights Agreement dated as of April 14,
2009 between the Company and Computershare Trust Company, N.A. (2)10.1
    
    
    Third Amendment to Financing Agreement dated as of July 2, 2009 by and among the
Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts Infant Products, Inc.
and The CIT Group/Commercial Services, Inc. (1)31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Executive Officer (3)31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Financial Officer (3)32.1
    
    
    Section 1350 Certification by the Companys Chief Executive Officer (3)32.2
    
    
    Section 1350 Certification by the Companys Chief Financial Officer (3)
 (1)
    
    Incorporated herein by reference to Registrants Current Report on Form 8-K
dated July 6, 2009.(2)
    
    Incorporated herein by reference to Registrants Current Report on Form 8-K
dated April 16, 2009.(3)
    
    Filed herewith.  15