##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    April 2, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission file
    no. 1-7604
  Crown Crafts, Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

58-0678148(State of
    Incorporation)

(I.R.S. Employer
    Identification No.)916 S. Burnside
    Ave.
    Gonzales, Louisiana(Address of principal
    executive offices)

70737(Zip Code)   Registrants Telephone Number, including area code:
 (225) 647-9100
  Securities registered pursuant to Section 12(b) of the
    Act:
   Title of Class

Name of Exchange on Which
    RegisteredCommon Stock, $0.01 par value

OTC Bulletin BoardCommon Share Purchase Rights

OTC Bulletin Board   Securities registered pursuant to Section 12(g) of the
    Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o o þ
  o þ
      Documents
    Incorporated by Reference:




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##### Table of Contents



PART I
  Cautionary
    Notice Regarding Forward-Looking Statements
        ITEM 1.
    Business    Products
    Product
    Design and Styling
   2




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##### Table of Contents



Raw
    Materials
      Product
    Sourcing
      Sales and
    Marketing
       3




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Customers
    Fiscal Year2006


2005


2004Wal-Mart Stores, Inc.


35
%


29
%


27
%Toys R Us


30
%


36
%


36
%Target Corporation


14
%


12
%


12
%   Seasonality
    and Inventory Management
      Order
    Backlog
    Trademarks,
    Copyrights and Patents
  ® ® ® ® ® ®
  ®
     4




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##### Table of Contents



Competition
    Government
    Regulation and Environmental Control
    Employees
    International
    Sales
    ITEM 1A.
    Risk
    Factors  The following risk factors as well as the other information
    contained in this report and other filings with the Securities
    and Exchange Commission should be considered in evaluating the
    Companys business. Additional risks and uncertainties not
    presently known to us or that we currently consider immaterial
    may also impair our business operations. If any of the following
    risks actually occur, operating results may be affected in
    future periods.
  The
    loss of one or more of the Companys key customers could
    result in a material loss of revenues.
    The
    loss of one or more of the Companys licenses could result
    in a material loss of revenues.
  ®
 5




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Changes
    in international trade regulations and other risks associated
    with foreign trade could adversely affect the Companys
    sourcing.
    The
    strength of our competitors may impact our ability to maintain
    and grow our sales, which could decrease the Companys
    revenues.
    The
    Companys ability to anticipate and respond to
    consumers tastes and preferences could adversely affect
    the Companys revenues.
    Customer
    pricing pressures could result in lower selling prices which
    could negatively affect the Companys operating
    results.
    The
    Companys success is dependent upon retaining key
    management personnel.
    ITEM 1B.
    Unresolved
    Staff Comments    ITEM 2.
    Properties   6




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##### Table of Contents



Approximate


Owned/Location

Use

Square Feet


LeasedGonzales, Louisiana

Administrative and sales office


17,761



LeasedBerea, Kentucky

Offices, manufacturing, warehouse
    and distribution facilities and retail store


53,000



OwnedCompton, California

Offices, warehouse and
    distribution center


157,400



LeasedHuntington Beach, California

Offices


7,574



LeasedRogers, Arkansas

Sales office


1,625



Leased     ITEM 3.
    Legal
    Proceedings    ITEM 4.
    Submission
    of Matters to a Vote of Security Holders    PART II
  ITEM 5.
    Market
    For Registrants Common Stock, Related Stockholder Matters
    and Issuer Purchases of Equity Securities      Quarter

High


LowFiscal 2006First Quarter

$
0.60


$
0.43Second Quarter


0.69



0.45Third Quarter


0.70



0.44Fourth Quarter


0.70



0.55Fiscal 2005First Quarter

$
0.79


$
0.52Second Quarter


0.78



0.47Third Quarter


0.57



0.43Fourth Quarter


0.69



0.43  7




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##### Table of Contents



Equity
    Compensation Plans
    Number of





Number ofSecurities to be


Weighted-


SecuritiesIssued Upon


Average


RemainingExercise of


Exercise Price


Available forOutstanding


of Outstanding


Future IssuanceOptions,


Options,


Under EquityWarrants and


Warrants and


CompensationPlan Category

Rights


Rights


PlansEquity compensation plans
    approved by security holders:Amended 1995 Stock Option Plan


536,100


$
0.80



460,400   ITEM 6.
    Selected
    Financial Data    Fiscal Year2006


2005


2004


2003


2002(In thousands, except per share
    data)For the yearNet sales

$
72,629


$
83,908


$
86,227


$
94,735


$
117,591Gross profit


17,088



17,025



19,594



21,420



25,928Income from operations


7,041



6,237



7,434



6,959



5,022Net income


7,967



2,438



3,103



2,487



27,002Basic net income per share


0.84



0.26



0.33



0.26



2.95Diluted net income per share


0.37



0.11



0.14



0.12



1.37Cash dividends per share


















At year endTotal assets

$
58,179


$
54,124


$
58,387


$
57,926


$
60,200Long-term debt


23,922



25,085



28,447



30,895



36,773Shareholders equity


28,842



20,875



18,437



15,265



12,813   ITEM 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations   8




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Results
    of Operations
    Fiscal Year


2006 Compared to 2005


2005 Compared to 20042006


2005


2004


$ Change


% Change


$ Change


% Change(Dollars in thousands)Net Sales by CategoryBedding, Blankets and Accessories

$
48,686


$
55,792


$
56,418


$
(7,106
)


(12.7
)%

$
(626
)


(1.1
)%Bibs and Bath


21,141



24,887



26,413



(3,746
)


(15.1
)%


(1,526
)


(5.8
)%Handwoven Products


2,802



3,229



3,396



(427
)


(13.2
)%


(167
)


(4.9
)%Total Net Sales


72,629



83,908



86,227



(11,279
)


(13.4
)%


(2,319
)


(2.7
)%Cost of Products Sold


55,541



66,883



66,633



(11,342
)


(17.0
)%


250



0.4
%Gross Profit


17,088



17,025



19,594



63



0.4
%


(2,569
)


(13.1
)%% of Net Sales


23.5
%


20.3
%


22.7
%Marketing and Administrative
    Expenses


10,047



10,788



12,160



(741
)


(6.9
)%


(1,372
)


(11.3
)%% of Net Sales


13.8
%


12.9
%


14.1
%Interest Expense


3,046



3,793



4,055



(747
)


(19.7
)%


(262
)


(6.5
)%Other  net


4



99



(54
)


(95
)


(96.0
)%


153



(283.3
)%Income Tax(Benefit) Expense


(3,968
)


105



222



(4,073
)


(3,879.0
)%


(117
)


(52.7
)%Net Income


7,967



2,438



3,103



5,529



(226.8
)%


(665
)


(21.4
)%% of Net Sales


11.0
%


2.9
%


3.6
%   Net Sales: ®
    direct-to-retail.
   9




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##### Table of Contents



Gross Profit:
  ® ®
  Marketing and Administrative
    Expenses:
  Interest Expense:
  Income Tax Benefit:
  Financial
    Position, Liquidity and Capital Resources
     10




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April 2,


April 3,2006


2005Senior notes and senior
    subordinated notes

$
16,000


$
20,500Non-interest bearing notes


8,000



8,000Capital leases


58



38PIK notes


1,077



809Original issue discount


(1,177
)


(1,945
)23,958



27,402Less current maturities


36



2,317$
23,922


$
25,085     Revolving Credit
  Senior Notes
  Senior Subordinated Notes
        Fiscal

Sub Notes


PIK Notes


Other


Total2007










36



362008


24,000
*


1,077



19



25,0962009










3



3Total

$
24,000


$
1,077


$
58


$
25,135     *
    
    Includes $8 million non-interest bearing note issued at an
    original issue discount of $4.1 million. 11




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##### Table of Contents



Payments Due by PeriodLess Than


1 - 3


3 - 5


More ThanTotal


1 Year


Years


Years


5 Years(In thousands)Contractual
    ObligationsLong-Term Debt Obligations

$
25,077


$



$
25,077


$



$
Interest on Long-Term Debt


2,219



1,690



529







Capital Lease Obligations


58



36



22







Operating Lease Obligations


740



620



117



3



Purchase Obligations


271



46



225







Minimum Royalty Obligations


2,705



2,083



622







Total Contractual Obligations

$
31,070


$
4,475


$
26,592


$
3


$
     and/or
  Off-Balance
    Sheet Arrangements
   12




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##### Table of Contents



Critical
    Accounting Policies
    Revenue Recognition:
  Use of Estimates:
  Allowances Against Accounts Receivable:
  EITF 01-9,
      Royalty Payments:
 13




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##### Table of Contents



Inventory Valuation: first-in, work-in-process
      Provisions for Income Taxes:
  Valuation of Long-Lived Assets, Identifiable Intangibles and
    Goodwill:
   14




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##### Table of Contents



Goodwill and Other Intangible Assets.
  Recently-Issued
    Accounting Standards
  Share-Based Payment, an Amendment of FASB Statement
    No. 123
  Accounting Changes and Error Corrections. Accounting
    Changes Reporting Accounting
    Changes in Interim Financial Statements
  Accounting for Asset Retirement
    Obligations and/or
  ITEM 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk   15




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##### Table of Contents



ITEM 8.
    Financial
    Statements and Supplementary Data    ITEM 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    ITEM 9A.
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e) Rule 13a-15 15d-15
  Rules 13a-15 15d-15
  ITEM 9B.
    Other
    Information    PART III
  ITEM 10.
    Directors
    and Executive Officers of the Registrant  Regulation S-K Regulation S-K
  ITEM 11.
    Executive
    Compensation    ITEM 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters   16




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##### Table of Contents



ITEM 13.
    Certain
    Relationships and Related Transactions    ITEM 14.
    Principal
    Accountant Fees and Services    PART IV
  ITEM 15.
    Exhibits
    and Financial Statement Schedules  (a)1.  Financial
    Statements
    Report of Independent Registered
    Public Accounting FirmConsolidated Balance Sheets as of
    April 2, 2006 and April 3, 2005Consolidated Statements of Income
    and Comprehensive Income for the Fiscal Years Ended
    April 2, 2006, April 3, 2005 and March 28, 2004Consolidated Statements of Changes
    in Shareholders Equity for the Fiscal Years Ended
    April 2, 2006, April 3, 2005 and March 28, 2004Consolidated Statements of Cash
    Flows for the Fiscal Years Ended April 2, 2006,
    April 3, 2005 and March 28, 2004Notes to Consolidated Financial
    Statements   (a)2.  Financial
    Statement Schedule
       17




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##### Table of Contents



SCHEDULE II
  CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  ANNUAL
    REPORT ON
    FORM 10-K
  Valuation and Qualifying
    AccountsColumn A

Column B


Column C


Column D


Column ECharged toBalance at


Costs and





Balance atBeginning


(Reversed from)





End ofof Period


Expenses


Deductions(1)


Period(In thousands)Accounts Receivable Valuation
    Accounts:Year Ended March 28,
    2004Allowance for doubtful accounts


183



66



217



32Allowance for customer deductions


1,744



7,500



7,218



2,026Year Ended April 3,
    2005Allowance for doubtful accounts


32



4



14



22Allowance for customer deductions


2,026



6,792



7,429



1,389Year Ended April 2,
    2006Allowance for doubtful accounts


22



13



2



33Allowance for customer deductions


1,389



5,376



5,634



1,131Inventory Valuation
    Accounts:Year Ended March 28,
    2004Allowance for discontinued and
    irregulars


1,633



(630
)






1,003Year Ended April 3,
    2005Allowance for discontinued and
    irregulars


1,003



(282
)






721Year Ended April 2,
    2006Allowance for discontinued and
    irregulars


721



(194
)






527Restructuring
    Reserve(2):Year ended March 28,
    2004Allowance for restructuring costs


1,721







1,691



30Year ended April 3,
    2005Allowance for restructuring costs


30







30



     (1)
    
    Deductions from the allowance for doubtful accounts represent
    the amount of accounts written off reduced by any subsequent
    recoveries.(2)
    
    Reserve relates to the decision to close the Companys
    Mexican manufacturing facility in fiscal 2003. 18




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##### Table of Contents



(a)3.  Exhibits
  Regulation S-K
  ExhibitNumber



Description of
    Exhibits2
.1



Merger Agreement dated as of
    July 23, 2001 by and among the Company, Crown Crafts
    Designer, Inc., Design Works Holding Company and Design Works,
    Inc. (the Merger Agreement)(2)3
.1



Amended and Restated Certificate
    of Incorporation of the Company(7)3
.2



Bylaws of the Company(7)4
.1



Instruments defining the rights of
    security holders are contained in the Amended and Restated
    Certificate of Incorporation of the Company(7)4
.2



Instruments defining the rights of
    security holders are contained in the Bylaws of the Company(7)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, as Borrower, Wachovia Bank, N.A., as
    Agent, and Wachovia Bank, N.A., Bank of America, N.A., and The
    Prudential Insurance Company of America, as Lenders (the
    Sub Debt Agreement)(included as Exhibit C to
    the Sub Debt Agreement)(2)10
.1



Crown Crafts, Inc. Amended 1995
    Stock Option Plan(1)10
.2



Form of Nonstatutory Stock Option
    Agreement (pursuant to 1995 Stock Option Plan)(1)10
.3



Form of Nonstatutory Stock Option
    Agreement for Nonemployee Directors (pursuant to 1995 Stock
    Option Plan)(1)10
.4



Form of Restricted Stock Agreement
    entered into in connection with the Merger Agreement(2)10
.5



Credit Agreement dated as of
    July 23, 2001 by and among the Company, Churchill Weavers,
    Inc., Hamco, Inc., Crown Crafts Infant Products, Inc.
    (collectively, the Borrowers), Wachovia Bank, N.A.,
    as Agent, and Wachovia Bank, N.A., Bank of America, N.A., and
    The Prudential Insurance Company of America (collectively, the
    Lenders) (the Credit Agreement)(2)10
.6



Form of Revolving Note issued in
    connection with the Credit Agreement (included as
    Exhibit A-1
    to the Credit Agreement)(2)10
.7



Form of Term Note issued in
    connection with the Credit Agreement (included as
    Exhibit A-2
    to the Credit Agreement)(2)10
.8



Form of Domestic Stock Pledge
    Agreement entered into in connection with the Credit Agreement
    (included as Exhibit N to the Credit Agreement)(2)10
.9



Form of Foreign Stock Pledge
    Agreement entered into in connection with the Credit Agreement
    (included as Exhibit T to the Credit Agreement)(2)10
.10



Mortgage, Security Agreement and
    Fixture Financing Statement dated September 22, 1999 from
    Churchill Weavers, Inc. (Churchill) to Wachovia
    Bank, N.A., 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(2)10
.11



Sub Debt Agreement(2)10
.12



Form of Note issued in connection
    with the Sub Debt Agreement (included as
    Exhibit A-1
    to the Sub Debt Agreement)(2)10
.13



Form of Warrant issued in
    connection with the Sub Debt Agreement (included as
    Exhibit B to the Sub Debt Agreement)(2)10
.14



Form of Domestic Stock Pledge
    Agreement entered into in connection with the Sub Debt Agreement
    (included as Exhibit D to the Sub Debt Agreement)(2)10
.15



Form of Foreign Stock Pledge
    Agreement entered into in connection with the Sub Debt Agreement
    (included as Exhibit E to the Sub Debt Agreement)(2)10
.16



Form of Security Agreement entered
    into in connection with the Sub Debt Agreement (included as
    Exhibit F to the Sub Debt Agreement)(2)10
.17



Mortgage, Security Agreement and
    Fixture Financing Statement dated July 23, 2001 from
    Churchill to Wachovia Bank, N.A., as Collateral Agent for the
    Lenders, entered into in connection with the Sub Debt
    Agreement(2) 19




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##### Table of Contents



ExhibitNumber



Description of
    Exhibits10
.18



Amended and Restated Security
    Agreement dated as of July 23, 2001 by and among the
    Borrowers and Wachovia Bank, N.A., as Collateral Agent for the
    Lenders, entered into in connection with the Credit Agreement(2)10
.19



Form of Non-Competition and
    Non-Disclosure Agreement entered into in connection with the
    Merger Agreement (included as Exhibit E to the Merger
    Agreement)(2)10
.20



Employment Agreement dated
    July 23, 2001 by and between the Company and E. Randall
    Chestnut(2)10
.21



Second Amendment to Subordinated
    Note and Warrant Purchase Agreement dated as of
    February 10, 2003 by and among the Company, Banc of America
    Strategic Solutions, Inc. (assignee of Bank of America, N.A.),
    The Prudential Insurance Company of America and Wachovia Bank,
    National Association (successor by merger to Wachovia Bank,
    N.A.)(3)10
.22



Third Amendment to Credit
    Agreement dated as of February 10, 2003 by and among the
    Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts
    Infant Products, Inc., Wachovia Bank, National Association
    (successor by merger to Wachovia Bank, N.A.), as Agent, and
    Wachovia Bank, National Association (successor by merger to
    Wachovia Bank, N.A.), Banc of America Strategic Solutions, Inc.
    (assignee of Bank of America, N.A.) and The Prudential Insurance
    Company of America, as Lenders(3)10
.23



Global Amendment Agreement dated
    as of April 29, 2003 by and among the Company, Churchill
    Weavers, Inc., Hamco, Inc., Crown Crafts Infant Products, Inc.,
    Wachovia Bank National Association, Banc of America Strategic
    Solutions, Inc., The Prudential Insurance Company of America and
    Bank of America, N.A.(4)10
.24



Amendment to the Companys
    Amended 1995 Stock Option Plan Adopted by the Board of Directors
    on April 29, 2003(5)10
.25



Fourth Amendment to Subordinated
    Note and Warrant Purchase Agreement dated as of August 1,
    2003, by and among the Company, Banc of America Strategic
    Solutions, Inc. (assignee of Bank of America, N.A.), The
    Prudential Insurance Company of America and Wachovia Bank,
    National Association (successor by merger to Wachovia Bank,
    N.A.)(6)10
.26



Fifth Amendment to Credit
    Agreement dated as of August 1, 2003 by and among the
    Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts
    Infant Products, Inc., Wachovia Bank, National Association
    (successor by merger to Wachovia Bank, N.A.), as Agent, and
    Wachovia Bank, National Association (successor by merger to
    Wachovia Bank, N.A.), Banc of America Strategic Solutions, Inc.
    (assignee of Bank of America, N.A.) and The Prudential Insurance
    Company of America, as Lenders(6)10
.27



Amended and Restated Support
    Agreement dated as of August 6, 2003 by and between the
    Company and Wynnefield Capital Management, LLC(6)10
.28



Sixth Amendment to Credit
    Agreement dated as of December 16, 2003 by and among the
    Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts
    Infant Products, Inc., Wachovia Bank, National Association
    (successor by merger to Wachovia Bank, N.A.), as Agent, and
    Wachovia Bank, National Association (successor by merger to
    Wachovia Bank, N.A.), Banc of America Strategic Solutions, Inc.
    (assignee of Bank of America, N.A.) and The Prudential Insurance
    Company of America, as Lenders(7)10
.29



Amended and Restated Severance
    Protection Agreement dated April 20, 2004 by and between
    the Company and E. Randall Chestnut(8)10
.30



Amended and Restated Employment
    Agreement dated April 20, 2004 by and between the Company
    and Amy Vidrine Samson(8)10
.31



Amended and Restated Employment
    Agreement dated April 20, 2004 by and between the Company
    and Nanci Freeman(8)10
.32



Seventh Amendment to Credit
    Agreement dated as of February 4, 2005 by and among the
    Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts
    Infant Products, Inc., Wachovia Bank, National Association
    (successor by merger to Wachovia Bank, N.A.), as Agent, and
    Wachovia Bank, National Association (successor by merger to
    Wachovia Bank, N.A.), Banc of America Strategic Solutions, Inc.
    (assignee of Bank of America, N.A.) and The Prudential Insurance
    Company of America, as Lenders(9) 20




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##### Table of Contents



ExhibitNumber



Description of
    Exhibits10
.33



Fifth Amendment to Subordinated
    Note and Warrant Purchase Agreement dated as of February 4,
    2005 by and among the Company and Banc of America Strategic
    Solutions, Inc. (assignee of Bank of America, N.A.), The
    Prudential Insurance Company of America, and Wachovia Bank,
    National Association (successor by merger to Wachovia Bank,
    N.A.), as Lenders(9)10
.34



Eighth Amendment to Credit
    Agreement dated as of May 27, 2005 by and among the
    Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts
    Infant Products, Inc., Wachovia Bank, National Association
    (successor by merger to Wachovia Bank, N.A.), as Agent, and
    Wachovia Bank, National Association (successor by merger to
    Wachovia Bank, N.A.), Banc of America Strategic Solutions, Inc.
    (assignee of Bank of America, N.A.) and The Prudential Insurance
    Company of America, as Lenders(10)10
.35



Agreement between the Company and
    Wynnefield Capital, Inc. and Frederick G. Wasserman dated
    November 4, 2005(11)14
.1



Code of Ethics(8)21




Subsidiaries of the Company(12)23




Consent of Independent Registered
    Public Accounting Firm(12)31
.1



Rule 13a-14(a)/15d-14(a)
    Certification by the Companys Chief Executive Officer(12)31
.2



Rule 13a-14(a)/15d-14(a)
    Certification by the Companys Chief Financial Officer(12)32
.1



Section 1350 Certification by
    the Companys Chief Executive Officer(12)32
.2



Section 1350 Certification by
    the Companys Chief Financial Officer(12)     (1)
    
    Incorporated herein by reference to Registrants Definitive
    Proxy Statement filed October 14, 1999.(2)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated July 23, 2001.(3)
    
    Incorporated herein by reference to Registrants Quarterly
    Report on
    Form 10-Q
    for the quarter ended December 29, 2002.(4)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated May 9, 2003.(5)
    
    Incorporated herein by reference to Registrants Annual
    Report on
    Form 10-K
    for the fiscal year ended March 30, 2003.(6)
    
    Incorporated herein by reference to Registrants Quarterly
    Report on
    Form 10-Q
    for the quarter ended June 29, 2003.(7)
    
    Incorporated herein by reference to Registrants Quarterly
    Report on
    Form 10-Q
    for the quarter ended December 28, 2003.(8)
    
    Incorporated herein by reference to Registrants Annual
    Report on
    Form 10-K
    for the fiscal year ended March 28, 2004.(9)
    
    Incorporated herein by reference to Registrants Quarterly
    Report on Form
    10-Q for the
    quarter ended December 26, 2004.(10)
    
    Incorporated herein by reference to Registrants Current
    Report on Form
    8-K dated
    May 27, 2005.(11)
    
    Incorporated herein by reference to Registrants Current
    Report on Form
    8-K dated
    November 4, 2005.(12)
    
    Filed herewith. 21




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##### Table of Contents



SIGNATURES
    CROWN CRAFTS, INC.
  By:
    /s/  E.
    Randall Chestnut   Chief Executive Officer
    Signatures

Title

Date/s/  E.
    Randall ChestnutE.
    Randall Chestnut

Chief Executive Officer,
    Director

June 13, 2006/s/  William
    T. Deyo, Jr.William
    T. Deyo, Jr.

Director

June 13, 2006/s/  Steven
    E. FoxSteven
    E. Fox

Director

June 13, 2006/s/  Sidney
    KirschnerSidney
    Kirschner

Director

June 13, 2006/s/  Zenon
    S. NieZenon
    S. Nie

Director

June 13, 2006/s/  William
    P. PayneWilliam
    P. Payne

Director

June 13, 2006/s/  Donald
    RatajczakDonald
    Ratajczak

Director

June 13, 2006/s/  James
    A. VerbruggeJames
    A. Verbrugge

Director

June 13, 2006/s/  Amy
    Vidrine SamsonAmy
    Vidrine Samson

Chief Financial Officer,
    Chief Accounting Officer

June 13, 2006  22




---



##### 



ITEM 8.
    Financial
    Statements and Supplementary Data  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  
  PageAudited Financial Statements:Report of
    Independent Registered Public Accounting Firm


F-1Consolidated
    Balance Sheets as of April 2, 2006 and April 3,
    2005


F-2Consolidated
    Statements of Income and Comprehensive Income for the Fiscal
    Years Ended April 2, 2006, April 3, 2005, and
    March 28, 2004


F-3Consolidated
    Statements of Changes in Shareholders Equity for the
    Fiscal Years Ended April 2, 2006, April 3, 2005, and
    March 28, 2004


F-4Consolidated
    Statements of Cash Flows for the Fiscal Years Ended
    April 2, 2006, April 3, 2005, and March 28,
    2004


F-5Notes to
    Consolidated Financial Statements


F-6Supplemental Financial Information:Selected Quarterly
    Financial Information (unaudited)


F-17SubsidiariesConsent of Independent Registered Public Accounting FirmCertification by the Chief Executive OfficerCertification by the Chief Financial OfficerCertification by the Chief Executive OfficerCertification by the Chief Financial Officer   23




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           
    F-1




---



##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES



CONSOLIDATED
    BALANCE SHEETS

April 2, 2006 and April 3, 2005 2006


2005(Dollar amounts in thousands,
    except share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
3,790


$
955Accounts receivable (net of
    allowances of $1,164 in 2006 and $1,411 in 2005)Due from factor


12,465



13,258Other


1,992



1,110Inventories, net


9,742



12,544Prepaid expenses


1,177



1,450Deferred income taxes


990



Total current assets


30,156



29,317Property, plant and
    equipment  at cost:Land, buildings and improvements


1,375



1,447Machinery and equipment


2,459



2,657Furniture and fixtures


649



6614,483



4,765Less accumulated depreciation


2,945



3,179Property, plant and
    equipment  net


1,538



1,586Other assets:Goodwill, net


22,974



22,974Deferred income taxes


3,397



120Other


114



127Total other assets


26,485



23,221Total Assets

$
58,179


$
54,124LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
3,511


$
3,729Accrued wages and benefits


942



669Accrued royalties


559



1,051Other accrued liabilities


367



398Current maturities of long-term
    debt


36



2,317Total current
    liabilities


5,415



8,164Non-current
    liabilities:Long-term debt


23,922



25,085Total non-current
    liabilities


23,922



25,085Commitments and
    contingencies






Shareholders
    equity:Common stock  par
    value $0.01 per share; 74,000,000 shares authorized;
    9,505,937 shares outstanding at April 2, 2006 and
    April 3, 2005


95



95Additional paid-in capital


38,244



38,244Accumulated deficit


(9,497
)


(17,464
)Total shareholders
    equity


28,842



20,875Total Liabilities and
    Shareholders Equity

$
58,179


$
54,124    F-2




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

Fiscal years ended April 2, 2006, April 3,
    2005, and March 28, 2004 2006


2005


2004(Amounts in thousands, exceptper share amounts)Net sales

$
72,629


$
83,908


$
86,227Cost of products sold


55,541



66,883



66,633Gross profit


17,088



17,025



19,594Marketing and administrative
    expenses


10,047



10,788



12,160Income from operations


7,041



6,237



7,434Other income (expense):Interest expense


(3,046
)


(3,793
)


(4,055
)Other  net


4



99



(54
)Income before income taxes


3,999



2,543



3,325Income tax (benefit) expense


(3,968
)


105



222Net income


7,967



2,438



3,103Other comprehensive income, net of
    tax:Foreign currency translation
    adjustment










25Comprehensive income

$
7,967


$
2,438


$
3,128Basic income per share

$
0.84


$
0.26


$
0.33Diluted income per share

$
0.37


$
0.11


$
0.14Weighted average shares
    outstanding  basic


9,506



9,505



9,485Weighted average shares
    outstanding  diluted


21,728



21,945



22,393    F-3




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

Fiscal years ended April 2, 2006, April 3, 2005
    and March 28, 2004 CumulativeCommon Shares


Additional





Currency


TotalNumber of





Paid-in


Accumulated


Translation


ShareholdersShares


Amount


Capital


Deficit


Adjustment


Equity(Dollar amounts in
    thousands)Balances  March 30,
    2003


9,421,437


$
9,421


$
28,857


$
(22,988
)

$
(25
)

$
15,265Issuance of shares


83,500



84



(23
)










61Conversion from $1.00 par
    value to $0.01 par value






(9,410
)


9,410











Net income














3,103







3,103Currency translation adjustment














(17
)


25



8Balances  March 28,
    2004


9,504,937



95



38,244



(19,902
)






18,437Issuance of shares


1,000



















Net income














2,438







2,438Balances  April 3,
    2005


9,505,937



95



38,244



(17,464
)






20,875Net income














7,967







7,967Balances  April 2,
    2006


9,505,937


$
95


$
38,244


$
(9,497
)

$



$
28,842    F-4




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF CASH FLOWS

Fiscal years ended April 2, 2006, April 3,
    2005, and March 28, 2004 2006


2005


2004(Amounts in thousands)Operating activities:Net income

$
7,967


$
2,438


$
3,103Adjustments to reconcile net
    income to net cash provided by operating activities:Depreciation of property, plant
    and equipment


479



457



532Loss on sale of property, plant,
    and equipment


19



6



(2
)Deferred income tax (benefit)


(4,267
)






Discount accretion


768



681



605Changes in assets and liabilitiesAccounts receivable


(90
)


2,853



(1,445
)Inventories, net


2,802



1,850



1,154Prepaid expenses


273



236



(601
)Other assets


12



24



(159
)Accounts payable


(217
)


(1,388
)


593Accrued liabilities


18



(984
)


(575
)Net cash provided by operating
    activities


7,764



6,173



3,205Investing activities:Capital expenditures


(450
)


(225
)


(422
)Proceeds from disposition of assets


1



10



282Other










6Net cash used in investing
    activities


(449
)


(215
)


(134
)Financing activities:Payment of long-term borrowing


(13,154
)


(34,124
)


(38,595
)Long-term borrowing


8,674



29,114



35,276Issuance of common stock










61Net cash used in financing
    activities


(4,480
)


(5,010
)


(3,258
)Net increase (decrease) in cash
    and cash equivalents


2,835



948



(187
)Cash and cash equivalents at
    beginning of year


955



7



194Cash and cash equivalents at
    end of year

$
3,790


$
955


$
7Supplemental cash flow
    information:Income taxes paid (refunded)

$
(75
)

$
64


$
276Interest paid


2,078



3,102



3,267Supplemental disclosure of
    non-cash investing and financing activitiesAccrued interest converted to
    long-term debt


268



268



268    F-5




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  Notes
    to Consolidated Financial Statements
 Fiscal Years Ended April 2, 2006, April 3, 2005
    and March 28, 2004
  Note 1 
    Description
    of Business    Note 2 
    Summary
    of Significant Accounting Policies  Basis of Presentation:
      Cash and Cash Equivalents:
  Use of Estimates:
  Revenue Recognition:
  Allowances Against Accounts Receivable:
  EITF 01-9,
 F-6




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
     Inventory Valuation: first-in,
  Royalty Payments:
  Depreciation and Amortization:
  Impairment of Long-lived Assets, Identifiable Intangibles and
    Goodwill:
    Foreign Currency Translation:
  Provisions for Income Taxes:
  Stock-Based Compensation: Accounting for Stock Issued to
    Employees
 F-7




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Accounting for
    Stock Based-Compensation Accounting for Stock-Based
    Compensation  Transition and Disclosure
    2006


2005


2004(Amounts in thousands,except per share data)Net income, as reported

$
7,967


$
2,438


$
3,103Deduct: Total stock-based employee
    compensation expense determined under fair value based method
    for all awards


29



67



83Pro forma net income

$
7,938


$
2,371


$
3,020Earnings per share:Basic  as reported

$
0.84


$
0.26


$
0.33Basic  pro forma

$
0.84


$
0.25


$
0.32Diluted  as
    reported

$
0.37


$
0.11


$
0.14Diluted  pro forma

$
0.37


$
0.11


$
0.13   2006


2005


2004(In percentages, except expected
    life)Dividend Yield










Expected Volatility


100



100



100Risk free interest rate


4.4



4.3



4.5Expected life, years


5.0



5.0



7.9   Segments and Related Information: Disclosures about Segments of an Enterprise and Related
    Information. ®
 F-8




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Net Income Per Share: Earnings per
    Share
  2006


2005


2004(Amounts in thousands,except per share data)Basic Net Income per Share:Net Income

$
7,967


$
2,438


$
3,103Weighted Average Number of
    Shares Outstanding


9,506



9,505



9,485Basic Net Income per Share

$
0.84


$
0.26


$
0.33Diluted Net Income per Share:Net Income

$
7,967


$
2,438


$
3,103Weighted Average Number of
    Shares Outstanding


9,506



9,505



9,485Effect of Dilutive Securities,
    Principally Warrants (Note 4)


12,222



12,440



12,908Average
    Shares  Diluted


21,728



21,945



22,393Diluted Net Income per Share

$
0.37


$
0.11


$
0.14   Derivative Instruments and Hedging
    Activities: Accounting for Derivative Instruments and
    Hedging Activities
  Recently Issued Accounting Standards: Share-Based Payment, an Amendment of FASB Statement
    No. 123
  Accounting Changes and Error Corrections. Accounting
    Changes Reporting Accounting
    Changes in Interim Financial Statements
 F-9




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Accounting for Asset Retirement
    Obligations and/or
  Note 3 
    Inventories    April 2, 2006


April 3, 2005Raw Materials

$
442


$
633Work in Process


73



210Finished Goods


9,227



11,701$
9,742


$
12,544     Note 4 
    Financing
    Arrangements  Factoring Agreement:
 F-10




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Notes Payable and Other Credit
    Facilities:
  April 2, 2006


April 3, 2005Senior notes and senior
    subordinated notes

$
16,000


$
20,500Non-interest bearing notes


8,000



8,000Capital leases


58



38PIK notes


1,077



809Original issue discount


(1,177
)


(1,945
)23,958



27,402Less current maturities


36



2,317$
23,922


$
25,085     Revolving Credit
  Senior Notes
  Senior Subordinated Notes
        Fiscal

Sub Notes


PIK Notes


Other


Total2007










36



362008


24,000
*


1,077



19



25,0962009










3



3Total

$
24,000


$
1,077


$
58


$
25,135     *
    
    Includes $8 million non-interest bearing note issued at an
    original issue discount of $4.1 million. F-11




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
         
    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  Rates estimated for debt with
    similar terms and remaining maturities to companies in a similar
    financial situation as the Company are used to estimate the fair
    value of existing debt. The carrying value is a reasonable
    estimate of fair value.    Note 5 
    Income
    Taxes    2006


2005


2004(In thousands)Current:Federal

$
24


$
42


$
24State and local


275



85



296Total current


299



127



320Deferred:Federal


(4,267
)


(22
)


(98
)Total deferred


(4,267
)


(22
)


(98
)Total (benefit) expense

$
(3,968
)

$
105


$
222  F-12




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
     2006


2005(In thousands)Assets/(Liabilities)Deferred tax
    asset  current:Employee benefit accruals

$
321


$
226Accounts receivable and inventory
    reserves


669



783Gross deferred tax
    asset  current


990



1,009Less: valuation allowance






(1,009
)Net deferred tax
    asset  current


990



Deferred tax asset
    (liability)  non-current:Goodwill

$
(714
)

$
Property, plant and equipment


18



(75
)Net operating loss carryforward


3,796



4,909Other


297



250Gross deferred tax
    asset  non-current


3,397



5,084Less: valuation allowance






(4,964
)Net deferred tax
    asset  non-current


3,397



120Net deferred income tax asset

$
4,387


$
120       2006


2005


2004(In thousands)Tax expense at statutory rate

$
1,266


$
865


$
1,131State income taxes, net of Federal
    income tax benefit


182



67



200Valuation allowance


(5,725
)


(1,076
)


(377
)Disposition of subsidiary










(836
)Foreign subsidiary losses










29Non-deductible expenses


272







Other


37



249



75Income tax (benefit) expense

$
(3,968
)

$
105


$
222  F-13




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Note 6 
    Retirement
    Plans    Note 7 
    Stock
    Options  Accounting for Stock Issued to
    Employees Accounting for Stock Based Compensation
     F-14




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
     WeightedNumber of


Exercise Price


AverageShares


per Share


Exercise PriceOptions outstanding March 30,
    2003


524,550



0.18-8.06



1.28Options granted


174,750



0.65



0.65Options exercised


(2,500
)


0.18



0.18Options canceled


(118,900
)


0.18-8.06



2.73Options outstanding March 28,
    2004


577,900



0.18-2.31



0.95Options granted


14,000



0.65



0.65Options exercised


(1,000
)


0.18



0.18Options canceled


(56,550
)


0.65-2.31



0.87Options outstanding April 3,
    2005


534,350


$
0.18-2.31


$
0.81Options granted


14,000



0.66



0.66Options canceled


(12,250
)

$
0.18-2.31



0.66Options outstanding April 2,
    2006


536,100


$
0.18-2.31


$
0.80     Weighted Avg.


Weighted Avg.





Weighted Avg.Number of


Remaining


Exercise Price


Number of


Exercise PriceOptions


Contractual


of Options


Shares


of SharesRange of Exercise
    Prices

Outstanding


Life


Outstanding


Exercisable


Exercisable$0.18-0.41


44,000



3.83 years


$
0.25



44,000


$
0.25$0.65


161,500



6.80 years



0.65



147,507



0.65$0.66


14,000



4.36 years



0.66







0.00$0.71


209,000



6.07 years



0.71



209,000



0.71$1.06-2.31


107,600



4.17 years



1.46



107,600



1.46536,100











508,107     Note 8 
    Major
    Customers    Fiscal Year2006


2005


2004Wal-Mart Stores, Inc.


35%



29%



27%Toys R Us


30%



36%



36%Target Corporation


14%



12%



12%  F-15




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Note 9 
    Commitments
    and Contingencies    Payments Due by PeriodLess Than


1 - 3


3 - 5


More ThanTotal


1 Year


Years


Years


5 Years(In thousands)Contractual
    ObligationsLong-Term Debt Obligations

$
25,077


$



$
25,077


$



$
Interest on Long-Term Debt


2,219



1,690



529







Capital Lease Obligations


58



36



22







Operating Lease Obligations


740



620



117



3



Purchase Obligations


271



46



225







Minimum Royalty Obligations


2,705



2,083



622







Total Contractual Obligations

$
31,070


$
4,475


$
26,592


$
3


$
      F-16




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
    ANNUAL REPORT ON
    FORM 10-K
    Selected Quarterly Financial Information
    UNAUDITED QUARTERLY FINANCIAL INFORMATION First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter(In thousands, except per share
    amounts)Fiscal Year ended April 2,
    2006Net sales

$
13,659


$
21,285


$
17,882


$
19,803Gross profit


2,967



4,609



4,325



5,187Net income (loss)


(269
)


1,151



1,063



6,022Basic net income (loss) per share


(0.03
)


0.12



0.11



0.63Diluted net income (loss) per share


(0.03
)


0.05



0.05



0.27Fiscal Year ended April 3,
    2005Net sales

$
16,908


$
23,025


$
20,664


$
23,311Gross profit


3,474



4,639



4,402



4,510Net income (loss)


(102
)


844



918



778Basic net income (loss) per share


(0.01
)


0.09



0.10



0.08Diluted net income (loss) per share


(0.01
)


0.04



0.04



0.04  F-17