##### 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 29, 2008
 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
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ o þ




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TABLE OF CONTENTS  ITEM 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   ExhibitsSIGNATURESIndex to ExhibitsRule 13a-14(a)/15d-14(a) CertificationRule 13a-14(a)/15d-14(a) CertificationSection 1350 CertificationSection 1350 Certification    Table of Contents  
 June 29, 2008
    
    
    March 30, 2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,074
    
    
    $
    7,930Accounts receivable (net of allowances of
$1,175 at June 29, 2008 and $1,268 at March
30, 2008):Due from factor
    
    
    13,423
    
    
    
    16,081Other
    
    
    2,328
    
    
    
    2,197Inventories, net
    
    
    17,846
    
    
    
    13,777Prepaid expenses
    
    
    931
    
    
    
    1,064Assets held for sale
    
    
    663
    
    
    
    663Deferred income taxes
    
    
    962
    
    
    
    885Total current assets
    
    
    46,227
    
    
    
    42,597Property, plant and equipment  at cost:Land, buildings and improvements
    
    
    203
    
    
    
    203Machinery and equipment
    
    
    2,298
    
    
    
    2,241Furniture and fixtures
    
    
    755
    
    
    
    7423,256
    
    
    
    3,186Less accumulated depreciation
    
    
    2,683
    
    
    
    2,597Property, plant and equipment  net
    
    
    573
    
    
    
    589Other assets:Goodwill, net
    
    
    22,884
    
    
    
    22,884Intangible assets, net
    
    
    6,847
    
    
    
    7,276Other
    
    
    183
    
    
    
    131Total other assets
    
    
    29,914
    
    
    
    30,291Total Assets
    
    $
    76,714
    
    
    $
    73,477LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    8,307
    
    
    $
    5,614Accrued wages and benefits
    
    
    1,548
    
    
    
    1,179Accrued royalties
    
    
    1,344
    
    
    
    1,023Other accrued liabilities
    
    
    671
    
    
    
    711Current maturities of long-term debt
    
    
    2,500
    
    
    
    2,504Total current liabilities
    
    
    14,370
    
    
    
    11,031Non-current liabilities:Long-term debt
    
    
    22,010
    
    
    
    22,311Deferred income taxes
    
    
    239
    
    
    
    402Total non-current liabilities
    
    
    22,249
    
    
    
    22,713Commitments and contingencies
    
    
    
    
    
    
    Shareholders equity:Common stock  $0.01 par value per share;
Authorized 74,000,000 shares; Issued
10,039,942 shares at June 29, 2008 and March
30, 2008
    
    
    100
    
    
    
    100Additional paid-in capital
    
    
    39,412
    
    
    
    39,247Treasury stock  at cost  679,296 shares at
June 29, 2008 and 562,647 at March 30, 2008
    
    
    (2,493
    )
    
    
    (2,071
    )Retained earnings
    
    
    3,076
    
    
    
    2,457Total shareholders equity
    
    
    40,095
    
    
    
    39,733Total Liabilities and Shareholders Equity
    
    $
    76,714
    
    
    $
    73,477
 See notes to unaudited condensed consolidated financial statements.
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##### Table of Contents



Three Months EndedJune 29, 2008
    
    
    July 1, 2007Net sales
    
    $
    19,755
    
    
    $
    15,360Cost of products sold
    
    
    15,517
    
    
    
    11,054Gross profit
    
    
    4,238
    
    
    
    4,306Marketing and administrative expenses
    
    
    2,906
    
    
    
    2,404Income from operations
    
    
    1,332
    
    
    
    1,902Other income (expense):Interest expense
    
    
    (327
    )
    
    
    (112
    )Other  net
    
    
    12
    
    
    
    (35
    )Income before income taxes
    
    
    1,017
    
    
    
    1,755Income tax expense
    
    
    392
    
    
    
    676Income from continuing operations after income taxes
    
    
    625
    
    
    
    1,079Loss from discontinued operations  net of income taxes
    
    
    (6
    )
    
    
    (94
    )Net income
    
    $
    619
    
    
    $
    985Weighted average shares
outstanding  basic
    
    
    9,415
    
    
    
    10,004Weighted average shares
outstanding  diluted
    
    
    9,677
    
    
    
    10,297Basic earnings per share:Income from continuing operations
    
    $
    0.07
    
    
    $
    0.11Loss from discontinued operations
    
    
    (0.00
    )
    
    
    (0.01
    )Total basic earnings per share
    
    $
    0.07
    
    
    $
    0.10Diluted earnings per share:Income from continuing operations
    
    $
    0.06
    
    
    $
    0.11Loss from discontinued operations
    
    
    (0.00
    )
    
    
    (0.01
    )Total diluted earnings per share
    
    $
    0.06
    
    
    $
    0.10
 See notes to unaudited condensed consolidated financial statements.
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Three Months EndedJune 29, 2008
    
    
    July 1, 2007Operating activities:Net income
    
    $
    619
    
    
    $
    985Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation of property, plant and equipment
    
    
    88
    
    
    
    83Amortization of intangibles
    
    
    434
    
    
    
    18Deferred income taxes
    
    
    (240
    )
    
    
    503Loss on sale of property, plant and equipment
    
    
    1
    
    
    
    8Discount accretion
    
    
    59
    
    
    
    55Stock-based compensation
    
    
    165
    
    
    
    126Changes in assets and liabilities:Accounts receivable
    
    
    2,527
    
    
    
    1,390Inventories, net
    
    
    (4,069
    )
    
    
    (4,408
    )Prepaid expenses
    
    
    133
    
    
    
    103Other assets
    
    
    (57
    )
    
    
    15Accounts payable
    
    
    2,693
    
    
    
    3,532Accrued liabilities
    
    
    650
    
    
    
    837Net cash provided by operating activities
    
    
    3,003
    
    
    
    3,247Investing activities:Capital expenditures
    
    
    (72
    )
    
    
    (61
    )Proceeds from disposition of assets
    
    
    
    
    
    
    13Net cash used in investing activities
    
    
    (72
    )
    
    
    (48
    )Financing activities:Payments on long-term debt
    
    
    (629
    )
    
    
    (6
    )Borrowings (repayments) under revolving line of credit, net
    
    
    264
    
    
    
    (2,742
    )Purchase of treasury stock
    
    
    (422
    )
    
    
    Net cash used in financing activities
    
    
    (787
    )
    
    
    (2,748
    )Net increase in cash and cash equivalents
    
    
    2,144
    
    
    
    451Cash and cash equivalents at beginning of period
    
    
    7,930
    
    
    
    33Cash and cash equivalents at end of period
    
    $
    10,074
    
    
    $
    484Supplemental cash flow information:Income taxes paid
    
    $
    602
    
    
    $
    15Interest paid
    
    
    213
    
    
    
    63
 See notes to unaudited condensed consolidated financial statements.
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##### 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 (GAAP) applicable to interim financial information and the rules and
regulations of the Securities and Exchange Commission (the SEC). Accordingly, they do not
include all of the information and disclosures required by GAAP 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. and its subsidiaries (collectively, the Company) as of June 29, 2008 and the results
of its operations and cash flows for the period presented. Such adjustments include normal,
recurring accruals. Operating results for the three-month period ended June 29, 2008 are not
necessarily indicative of the results that may be expected for the year ending March 29,
2009. For further information, refer to the Companys consolidated financial statements and
notes thereto included in the annual report on Form 10-K for the year ended March 30, 2008.Revenue Recognition:Sales are recorded when goods are shipped to customers and are reported
net of allowances for estimated returns and allowances in the consolidated statements of
income. Allowances for returns are estimated based on historical rates. Allowances for
returns, advertising allowances, warehouse allowances and volume rebates are netted against
sales. These allowances are recorded commensurate with sales activity and the cost of such
allowances is netted against sales in reporting the results of operations. Shipping and
handling costs, net of amounts reimbursed by customers, are relatively insignificant and are
included in net sales.Use of Estimates:The preparation of financial statements in conformity with GAAP 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 certain amount
of discontinued finished goods which necessitate the establishment of inventory reserves which
are highly subjective. Actual results could differ from those estimates.Segment and Related Information:The Company operates primarily in one principal segment,
infant and toddler products. These products consist of infant and toddler bedding, infant bibs
and related soft goods.Earnings Per Share:Earnings per share are calculated in accordance with SFAS No. 128,
Earnings per Share, which requires dual presentation of basic and diluted earnings per share on
the face of the consolidated statements of income for all entities with complex capital
structures. Earnings per common share are based on the weighted average number of shares
outstanding during the period. Basic and diluted weighted average shares are calculated in
accordance with the treasury stock method, which assumes that the proceeds from the exercise of
all options are used to repurchase common shares at market value. The number of shares
remaining after the exercise proceeds are exhausted represents the potentially dilutive effect
of the options.
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The following table sets forth the computation of basic and diluted net income per common share
for the three-month periods ended June 29, 2008 and July 1, 2007.
 Three-months
    
    
    Three-monthsended
    
    
    endedJune 29, 2008
    
    
    July 1, 2007(Amounts in thousands, except per share data)Income from continuing operations
    
    $
    625
    
    
    $
    1,079Loss from discontinued operations
    
    
    (6
    )
    
    
    (94
    )Net income, basic and diluted
    
    $
    619
    
    
    $
    985Weighted average number of shares outstandingBasic
    
    
    9,415
    
    
    
    10,004Effect of dilutive securities
    
    
    262
    
    
    
    293Diluted
    
    
    9,677
    
    
    
    10,297Earnings per common shareBasicContinuing operations
    
    $
    0.07
    
    
    $
    0.11Discontinued operations
    
    
    (0.00
    )
    
    
    (0.01
    )Total
    
    $
    0.07
    
    
    $
    0.10Earnings per common shareDilutedContinuing operations
    
    $
    0.06
    
    
    $
    0.11Discontinued operations
    
    
    (0.00
    )
    
    
    (0.01
    )Total
    
    $
    0.06
    
    
    $
    0.10
 Impairment of Long-lived Assets, Identifiable Intangibles and Goodwill:The Company reviews for
impairment long-lived assets and certain identifiable intangible assets whenever events or
changes in circumstances indicate that the carrying amount of any asset may not be recoverable.
In the event of impairment, the asset is written down to its fair market value. Assets to be
disposed of, if any, 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.
 The Company reviews the carrying value of goodwill annually and sooner if facts and
circumstances suggest that the asset may be impaired. Impairment of goodwill and write-downs,
if any, are measured based on estimates of future cash flows. Goodwill is stated net of
accumulated amortization of $6.4 million at June 29, 2008 and March 30, 2008. On April 1,
2002, the Company implemented Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets (SFAS No. 142). As a result, the Company discontinued
amortizing goodwill but continued to amortize other long-lived intangible assets. In lieu of
amortization, the Company is required to perform an annual impairment review of its goodwill.
The Company has determined that the fair value of its goodwill exceeded the recorded value at
April 2, 2007 and March 31, 2008.
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Allowances Against Accounts Receivable:The Companys allowances against accounts receivable
are primarily contractually agreed upon deductions for items such as advertising and warehouse
allowances and volume rebates. These deductions are recorded throughout the year commensurate
with sales activity. Funding of the majority of the Companys allowances occurs on a
per-invoice basis.The allowances for customer deductions, which are netted against accounts receivable in the
consolidated balance sheets, consist of agreed upon advertising support, markdowns and
warehouse and other allowances. Consistent with the guidance provided in EITF 01-9, all such
allowances are recorded as direct offsets to sales and such costs are accrued commensurate with
sales activities. When a customer requests deductions, the allowances are reduced to reflect
such payments.The Company analyzes the components of the allowances for customer deductions monthly and
adjusts the allowances to the appropriate levels. The timing of the customer initiated funding
requests for advertising support can cause the net balance in the allowance account to
fluctuate from period to period. The timing of such funding requests should have no impact on
the consolidated statements of income since such costs are accrued commensurate with sales
activity.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. 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.Royalty Payments:The Company has entered into agreements that provide for royalty payments
based on a percentage of sales with certain minimum guaranteed amounts. These royalty amounts
are accrued based upon historical sales rates adjusted for current sales trends by customers.
Total royalty expenses, net of royalty income, included in cost of sales amounted to $1.3
million and $0.9 million for the three-month periods ended June 29, 2008 and July 1, 2007,
respectively.Recently Issued Accounting Standards:In July 2006, the Financial Accounting Standards Board
(FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109(FIN 48), which clarifies the accounting and
disclosure for uncertain tax positions, as defined. FIN 48 seeks to reduce the diversity in
practice associated with certain aspects of the recognition and measurement related to
accounting for income taxes. On April 2, 2007, the Company adopted the provisions of FIN 48.
Based on its recent evaluation, the Company has concluded that there are no significant
uncertain tax positions requiring recognition in the Companys consolidated financial
statements. The Companys evaluation was performed for the years ended April 3, 2005, April 2,
2006, April 1, 2007, and March 30, 2008, the years which remain subject to examination by major
tax jurisdictions as of June 29, 2008. The Companys policy is to accrue interest expense and
penalties as appropriate on its estimated unrecognized tax benefits as a charge to interest
expense in the Companys consolidated financial statements.In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements(SFAS No. 157),
which defines fair value, establishes a framework for a reporting entity to measure fair value
in GAAP, and expands disclosure requirements related to fair value measurements. This
statement is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and for interim periods within those fiscal years. In February 2008, the
FASB issued Staff Position (FSP) No. 157-2, which delayed the effective date of SFAS No. 157
for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis, to fiscal years
beginning after November 15, 2008. The Company has not yet determined the impact that the
adoption of SFAS No. 157 will have on its non-financial assets and liabilities which are not
recognized on a recurring basis; however, the Company does not anticipate that it will
materially impact the Companys consolidated financial statements.In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities(SFAS No. 159). This statement provides companies an option to report
selected financial assets and liabilities at fair value. SFAS No. 159 is effective for
financial statements issued for fiscal years beginning after November 15, 2007. Upon adoption,
the Company did not elect the fair value option for any items within the scope of SFAS No. 159;
therefore, the adoption of SFAS No. 159 did not have an impact on the Companys consolidated
financial statements.
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In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations(SFAS No.
141(R)), which establishes principles and requirements for the reporting entity in a business
combination, including recognition and measurement in the financial statements of the
identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the
acquiree. This statement also establishes disclosure requirements to enable financial statement
users to evaluate the nature and financial effects of the business combination. SFAS No. 141(R)
applies prospectively to business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period beginning on or after December 15, 2008, and
interim periods within those fiscal years. Early adoption is prohibited.
 2.
    
    Share-Based Compensation:The Company has two incentive stock plans, the 1995 Stock Option
Plan (1995 Plan) and the 2006 Omnibus Incentive Plan (2006 Plan). The Company granted
non-qualified stock options to employees and non-employee directors from the 1995 Plan through
the fiscal year ended April 2, 2006. In conjunction with the approval of the 2006 Plan by the
Companys stockholders at its Annual Meeting in August 2006, options may no longer be issued
from the 1995 Plan.The 2006 Plan is intended to attract and retain directors, officers and employees of the
Company and to motivate these persons to achieve performance objectives related to the
Companys overall goal of increasing stockholder value. The principal reason for adopting the
2006 Plan is to ensure that the Company has a mechanism for long-term, equity-based incentive
compensation to directors, officers and employees. Awards granted under the 2006 Plan may be
in the form of qualified or non-qualified stock options, restricted stock, stock appreciation
rights, long-term incentive compensation units consisting of a combination of cash and shares
of the Companys common stock, or any combination thereof within the limitations set forth in
the 2006 Plan. The 2006 Plan is administered by the compensation committee of the board of
directors, which selects eligible employees and non-employee directors to participate in the
2006 Plan and determines the type, amount and duration of individual awards.The Company uses the Black-Scholes option-pricing model to determine the fair-value of stock
options under SFAS No. 123(R), consistent with the method previously used for pro forma
disclosures under SFAS No. 123. The Company elected to use the modified prospective transition
method permitted by SFAS No. 123(R). Under the modified prospective transition method, SFAS
No. 123(R) applies to stock options granted on or after April 3, 2006 as well as the unvested
portion of stock options that were outstanding as of April 2, 2006, including those that are
subsequently modified, repurchased or cancelled. Under the modified prospective transition
method, compensation expense recognized during the fiscal year ended April 1, 2007 included
compensation for all stock options granted prior to, but not yet vested as of, April 2, 2006 in
accordance with the original provisions of SFAS No. 123. Prior periods were not restated to
reflect the impact of adopting SFAS No. 123(R).The Company recorded $165,000 of share-based compensation during the three-month period ended
June 29, 2008, which affected basic and diluted earnings per share by $0.02. The Company
recorded $126,000 of stock-based compensation during the quarter ended July 1, 2007, which
affected basic and diluted earnings per share by $0.01. No share-based compensation costs were
capitalized as part of the cost of an asset as of June 29, 2008.
 Stock Options:The following table represents stock option activity for fiscal year 2009:
 Weighted-Average
    
    
    Number of OptionsExercise Price
    
    
    OutstandingOutstanding at March 30, 2008
    
    $
    2.15
    
    
    
    651,330Granted
    
    
    3.58
    
    
    
    200,000Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at June 29, 2008
    
    $
    2.48
    
    
    
    851,330Exercisable at June 29, 2008
    
    $
    1.41
    
    
    
    431,000
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During the quarter ended June 29, 2008, the Company granted 200,000 non-qualified stock options
at the market price at the date of grant, which options vest over a two-year period, assuming
continued service. The following weighted-average assumptions were used for the stock options
granted during the quarter ended June 29, 2008.
 OptionsIssued toEmployeesOptions Issued
    
    
    200,000Dividend Yield
    
    
    Expected Volatility
    
    
    60.00
    %Risk free interest rate
    
    
    3.54
    %Expected life in years
    
    
    5.75Forfeiture rate
    
    
    5.00
    %
 For the three -month period ended June 29, 2008, the Company recognized compensation expense
associated with stock options as follows (in thousands):
 Cost of
    
    
    Marketing &Products
    
    
    Administrative
    
    
    TotalSold
    
    
    Expenses
    
    
    ExpenseOptions granted in fiscal year 2007
    
    $
    11
    
    
    $
    37
    
    
    $
    48Options granted in fiscal year 2008
    
    
    9
    
    
    
    23
    
    
    
    32Options granted in fiscal year 2009
    
    
    3
    
    
    
    7
    
    
    
    10Unvested options at April 3, 2006
    
    
    
    
    
    
    1
    
    
    
    1Total stock option compensation
    
    $
    23
    
    
    $
    68
    
    
    $
    91
 For the quarter ended July 1, 2007, the Company recognized $52,000 of compensation expenses
associated with stock options, of which $12,000 was included in cost of products sold and
$40,000 was included in marketing and administrative expenses.Non-vested Stock:The fair value of non-vested stock granted is determined based on the number
of shares granted multiplied by the quoted closing price of the Companys common stock on the
date of grant. All non-vested stock granted under the 2006 Plan vests based upon continued
service.During the quarter ended October 1, 2006, the Company granted 375,000 shares of non-vested
stock with a fair value of $3.15 as of the date of the stock grants. These shares have
four-year cliff vesting. The Company recognized $74,000 of compensation expense related to
these non-vested stock grants during each of the three-month periods ended June 29, 2008 and
July 1, 2007, which was included in marketing and administrative expenses in the accompanying
consolidated statements of income. The deferred amount of these non-vested stock grants is
being amortized by monthly charges to earnings over the remaining portion of the vesting
period.At June 29, 2008, the amount of unrecognized compensation expense related to these stock grants
amounted to $640,000. The amount of compensation expense related to non-vested stock grants to
be recognized in future periods will be affected by any future non-vested stock grants and by
the separation from the Company of any employee who has received non-vested stock grants that
are unvested as of such employees separation date.
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3.
    
    Inventory:Major classes of inventory were as follows (in thousands):
 June 29, 2008
    
    
    March 30, 2008Raw Materials
    
    $
    48
    
    
    $
    40Work in Process
    
    
    
    
    
    
    Finished Goods
    
    
    17,798
    
    
    
    13,737Total inventory
    
    $
    17,846
    
    
    $
    13,777
 Inventory is recorded net of reserves for inventories classified as irregular or discontinued of
$0.4 million at June 29, 2008 and $0.3 million at March 30, 2008.4.
    
    Financing ArrangementsFactoring 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.Long-term debt: At June 29, 2008 and March 30, 2008, long term debt consisted of (in
thousands):
 June 29,
    
    
    March 30,2008
    
    
    2008Revolving line of credit
    
    $
    17,647
    
    
    $
    17,383Term loan
    
    
    3,542
    
    
    
    4,167Non-interest bearing notes
    
    
    4,000
    
    
    
    4,000Original issue discount
    
    
    (679
    )
    
    
    (739
    )Capital leases
    
    
    
    
    
    
    424,510
    
    
    
    24,815Less current maturities
    
    
    2,500
    
    
    
    2,504$
    22,010
    
    
    $
    22,311
  Revolving Line of Credit
  Term Loan
 Subordinated Notes
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Fiscal
    
    Revolver
    
    
    Term Loan
    
    
    Sub Notes
    
    
    Total2009
    
    
    
    
    
    $
    1,875
    
    
    
    
    
    
    $
    1,8752010
    
    
    
    
    
    
    1,667
    
    
    
    
    
    
    
    1,6672011
    
    $
    17,647
    
    
    
    
    
    
    $
    2,000
    
    
    
    19,6472012
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000Total
    
    $
    17,647
    
    
    $
    3,542
    
    
    $
    4,000
    
    
    $
    25,189
 5.
    
    AcquisitionsKimberly Grant:On December 29, 2006, Crown Crafts Infant Products, Inc. (CCIP), a
wholly-owned subsidiary of the Company, acquired substantially all of the assets of Kimberly
Grant, Inc., a designer of various infant and toddler products. The purchase price consisted of
$550,000 paid at closing and $50,000 paid upon renewal of the acquired Kimberly Grant
trademark.The assets acquired were limited to certain intangible assets, the fair values of which were
determined by the Company. The Companys resulting allocation of the purchase price, the
estimated useful life of the assets acquired, the accumulated amortization and the amortization
expense as of and for the three-month period ended June 29, 2008 is as follows:
 AggregateAmortizationExpenseGross
    
    
    Estimated
    
    
    
    
    
    
    three-monthsCarrying
    
    
    Useful
    
    
    Accumulated
    
    
    endedAmount
    
    
    Life
    
    
    Amortization
    
    
    June 29, 2008Tradename
    
    $
    466,387
    
    
    15 years
    
    $
    46,645
    
    
    $
    7,773Existing designs
    
    
    35,924
    
    
    1 year
    
    
    35,924
    
    
    
    Non-compete
    
    
    97,689
    
    
    15 years
    
    
    9,723
    
    
    
    1,629Totals
    
    $
    600,000
    
    
    
    
    
    
    $
    92,292
    
    
    $
    9,402
 Springs:On November 5, 2007, CCIP acquired certain assets from, and assumed certain liabilities
of, Springs Global US, Inc. (Springs Global) with respect to the baby products line of Springs
Global. The purchase price consisted initially of $12.4 million for the inventory and certain
intangible assets, which was subject to an adjustment pending the completion of a final valuation
of the inventory purchased. Upon the completion of this valuation, $1.4 million was returned to
the Company for a net purchase price of $11.0 million. The Company also capitalized $0.4 million
of direct costs associated with this acquisition for a total capitalized acquisition cost of
$11.4 million.The fair values of the intangible assets acquired were determined by the Company. The Companys
allocation of the intangible assets acquired, their estimated useful life, the accumulated
amortization and the amortization expense as of and for the year ended June 29, 2008 is as
follows:
 AggregateAmortizationExpenseGross
    
    
    Estimated
    
    
    
    
    
    
    three-monthsCarrying
    
    
    Useful
    
    
    Accumulated
    
    
    endedAmount
    
    
    Life
    
    
    Amortization
    
    
    June 29, 2008Licenses & existing designs
    
    $
    1,655,188
    
    
    2 years
    
    $
    551,732
    
    
    $
    206,898Licenses & future designs
    
    
    1,846,822
    
    
    4 years
    
    
    307,822
    
    
    
    115,425Non-compete
    
    
    114,981
    
    
    4 years
    
    
    19,181
    
    
    
    7,185Customer relationships
    
    
    3,817,538
    
    
    10 years
    
    
    254,482
    
    
    
    95,439Totals
    
    $
    7,434,529
    
    
    
    
    
    
    $
    1,133,217
    
    
    $
    424,947
 10




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Amortization expense related to acquisitions affected basic and diluted earnings per share by
$0.04.The Springs Global baby products line represented less than 2% of the total revenues of Springs
Global, and separate financial statements for the baby products line were not historically
prepared. Nonetheless, in connection with the acquisition, the management of Springs Global
furnished to the Company unaudited, abbreviated statements of revenues and direct expenses with
respect to the baby products line of Springs Global for the nine-month period ended September 29,
2007 and the twelve-month period ended December 30, 2006. These statements excluded charges for
corporate overhead, interest expense and income taxes, but included estimates of charges for
customer service, cash management, purchasing, accounting and information technology services
that were directly charged to the baby products line and/or allocated to it based on a relative
percentage of sales in the baby products line to the total sales of Springs Global. The periods
covered by these statements are not coterminous with the Companys fiscal periods. Additionally,
such charges and allocations are not necessarily indicative of the costs that would have been
incurred if the Springs Global baby products line had been a separate entity, or if the business
had been owned and operated by the Company. Certain of the Companys costs incurred to operate
the Springs Global baby products line are anticipated to be less than those incurred by Springs
Global; however, no reliably verifiable information is available to adjust the estimated results
of operations of the Springs Global baby products line, and no pro forma adjustments have been
made to give effect to these anticipated reduced costs.For pro forma purposes, the revenues and expenses reported by the Springs Global baby products
line for the three-month period ended March 31, 2007 (derived on a pro rata basis using the
nine-month period ended September 29, 2007 because the Company does not have Springs Globals
actual results of operations for the period ended March 31, 2007) were combined with the revenues
and expenses reported by the Company for the three-month period ended July 1, 2007 and adjusted
for pro rata estimates of the Companys revenues and expenses related to these products.The following unaudited proforma financial information presents a summary of the Companys
consolidated results of operations for the three-month period ended July 1, 2007, as if the
acquisition of the baby products line from Springs Global had occurred on April 2, 2007. This
proforma financial information includes adjustments to reflect the amortization of the intangible
assets acquired and an estimate of the interest expense that would have been incurred, but is not
otherwise necessarily indicative of the consolidated results of operations that would have been
reported by the Company if the acquisition had occurred on April 2, 2007 (in thousands):
 Three-MonthPeriod EndedJuly 1, 2007(Unaudited)Net sales
    
    $
    21,369Total operating expenses
    
    
    19,907Income from continuing operations
    
    $
    739Earnings per share:Basic
    
    $
    0.07Diluted
    
    $
    0.07
 6.
    
    Discontinued Operations:On February 2, 2007, the Company announced that it would liquidate
Churchill Weavers, Inc. (Churchill). During the first quarter of fiscal year 2008,
Churchills operations ceased and all employees were terminated. The Company is actively
marketing Churchills land and building for sale. The property has been appraised at greater
than net book value. In accordance with accounting guidelines, the property is classified as
assets held for sale in the consolidated balance sheets, and the operations of Churchill are
classified as discontinued operations in the consolidated statements of income.7.
    
    Treasury Stock:In June 2007, the board of directors of the Company created a capital
committee and authorized the committee to adopt a program that would allow the Company to
spend an aggregate of up to $6 million to repurchase shares of the Companys common stock from
July 1, 2007 through July 1, 2008. Pursuant to this program, the Company repurchased 116,649
shares during the three-month period ended June 29, 2008, at a cost of $422,000.
 11




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##### Table of Contents



Three-Month Period EndedJune 29, 2008
    
    July 1, 2007
    
    $ change
    
    % changeDollars in thousandsNet sales by categoryBedding, blankets and accessories
    
    $
    16,307
    
    
    $
    11,406
    
    
    $
    4,901
    
    
    
    43.0
    %Bibs and bath
    
    
    3,448
    
    
    
    3,954
    
    
    
    (506
    )
    
    
    -12.8
    %Total net sales
    
    
    19,755
    
    
    
    15,360
    
    
    
    4,395
    
    
    
    28.6
    %Cost of products sold
    
    
    15,517
    
    
    
    11,054
    
    
    
    4,463
    
    
    
    40.4
    %Gross profit
    
    
    4,238
    
    
    
    4,306
    
    
    
    (68
    )
    
    
    -1.6
    %% of net sales
    
    
    21.5
    %
    
    
    28.0
    %Marketing and administrative expenses
    
    
    2,906
    
    
    
    2,404
    
    
    
    502
    
    
    
    20.9
    %% of net sales
    
    
    14.7
    %
    
    
    15.7
    %Interest expense
    
    
    327
    
    
    
    112
    
    
    
    215
    
    
    
    192.0
    %Other income (expense)
    
    
    12
    
    
    
    (35
    )
    
    
    47
    
    
    
    -134.3
    %Income tax expense
    
    
    392
    
    
    
    676
    
    
    
    (284
    )
    
    
    -42.0
    %Income from continuing operations after taxes
    
    
    625
    
    
    
    1,079
    
    
    
    (454
    )
    
    
    -42.1
    %Discontinued operations  net of taxes
    
    
    (6
    )
    
    
    (94
    )
    
    
    88
    
    
    
    -93.6
    %Net income
    
    
    619
    
    
    
    985
    
    
    
    (366
    )
    
    
    -37.2
    %% of net sales
    
    
    3.1
    %
    
    
    6.4
    %
 Net Sales:
  12




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Gross Profit:
 Marketing and Administrative Expenses
 Interest Expense:
     13




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14




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Total Number of
    
    Approximate DollarShares Purchased as
    
    Value of Shares ThatTotal Number of
    
    
    
    
    
    Part of Publicly
    
    May Yet be PurchasedShares
    
    Average Price
    
    Announced Plans or
    
    Under the Plans orPeriod
    
    Purchased
    
    Paid Per Share (1)
    
    Programs (2)
    
    Programs (2)March 31, 2008
through May 4, 2008
    
    
    52,895
    
    
    $
    3.50
    
    
    
    52,895
    
    
    $
    3,743,851May 5, 2008 through
June 1, 2008
    
    
    35,495
    
    
    $
    3.60
    
    
    
    35,495
    
    
    $
    3,615,918June 2, 2008
through June 29,
2008
    
    
    28,259
    
    
    $
    3.84
    
    
    
    28,259
    
    
    $
    3,507,284Total
    
    
    116,649
    
    
    $
    3.62
    
    
    
    116,649
    
    
    $
    3,507,284
 
 (1)
    
    Includes broker fees of $0.03 per share.(2)
    
    In June 2007, the Companys board of directors formed a
Capital Committee which is authorized to cause the Company
to spend up to $6 million in the aggregate to repurchase
from its stockholders shares of the outstanding common
stock of the Company between July 1, 2007 and July 1, 2008
and to determine the terms and conditions under which any
such repurchases would be made. During the three-month
period ended September 30, 2007, 84,855 shares were
repurchased at an average price per share, including broker
fees, of $3.95. During the three-month period ended
December 30, 2007, 140,353 shares were repurchased at an
average price per share, including broker fees, of $3.70.
During the three-month period ended March 30, 2008, 337,439
shares were repurchased at an average price per share,
including broker fees, of $3.61.The authorization period for the repurchase of shares ended
on July 1, 2008. There were no shares repurchased
subsequent to June 29, 2008. 
   
   
   15




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Exhibit No.
    
    Exhibit10.1
    
    Governance and Standstill Agreement dated July 1, 2008 by and among Crown Crafts,
Inc., Wynnefield Small Cap Value, L.P., Wynnefield Partners Small Cap Value
Offshore Fund, Ltd., Wynnefield Partners Small Cap Value, L.P. I, Wynnefield
Capital Management, LLC, Wynnefield Capital, Inc., Channel Partnership II, L.P.,
Nelson Obus and Joshua Landes (1)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Executive Officer (2)31.2
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Financial Officer (2)32.1
    
    Section 1350 Certification by the Companys Chief Executive Officer (2)32.2
    
    Section 1350 Certification by the Companys Chief Financial Officer (2)
 
 (1)
    
    Incorporated herein by reference to Registrants Current Report on Form 8-K dated July
1, 2008.(2)
    
    Filed herewith. 
   CROWN CRAFTS, INC.Date: August 13, 2008
    /s/ Amy Vidrine SamsonAMY VIDRINE SAMSONChief Financial Officer
(duly authorized signatory and
Principal Financial and Accounting
Officer) 16




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##### Table of Contents



Index to Exhibits
 Exhibit No.
    
    Exhibit10.1
    
    Governance and Standstill Agreement dated July 1, 2008 by and among Crown Crafts,
Inc., Wynnefield Small Cap Value, L.P., Wynnefield Partners Small Cap Value
Offshore Fund, Ltd., Wynnefield Partners Small Cap Value, L.P. I, Wynnefield
Capital Management, LLC, Wynnefield Capital, Inc., Channel Partnership II, L.P.,
Nelson Obus and Joshua Landes (1)31.1
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Executive Officer (2)31.2
    
    Rule 13a-14(a)/15d-14(a) Certification by the Companys Chief Financial Officer (2)32.1
    
    Section 1350 Certification by the Companys Chief Executive Officer (2)32.2
    
    Section 1350 Certification by the Companys Chief Financial Officer (2)
 
 (1)
    
    Incorporated herein by reference to Registrants Current Report on Form 8-K dated July
1, 2008.(2)
    
    Filed herewith. 17