##### 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 March 28, 2010ORo

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(State of
    Incorporation)

58-0678148(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

The NASDAQ Capital MarketCommon Share Purchase Rights

The NASDAQ Capital Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large accelerated
    filer o

Accelerated
    filer o

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company þ   Rule 12b-2 o þ
      Documents
    Incorporated by Reference:




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PART I
  Cautionary
    Notice Regarding Forward-Looking Statements
        ITEM 1.
    Business  Description
    of Business
        Products
   2




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Sales and
    Marketing
      Product
    Design and Styling
    Raw
    Materials
    Product Group

Principal Raw MaterialsComforters, sheets and related accessories

Printed, woven and solid color cotton and poly-cotton fabrics,
    with polyester fibers used as filling materialsReusable bibs

Cotton/polyester knit terry, cotton woven terry and
    water-resistant fabricationsDisposable Placemats and Floor Mats

Polyethylene (PE)Disposable bibs, toilet seat covers and changing mats

Cellulose and non-woven paperReusable Floor Mats

Polyethylene Vinyl Acetate (PEVA)      3




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##### Table of Contents



Product
    Sourcing
        Customers
    Fiscal Year2010


2009Wal-Mart Stores, Inc.


43
%


47
%Toys R Us


21
%


21
%Target Corporation


*



10
%     *
    
    Amount represented less than 10% of the Companys gross
    sales for this fiscal year.  Seasonality
    and Inventory Management
    International
    Sales
    Government
    Regulation and Environmental Control
   4




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##### Table of Contents



Order
    Backlog
    Employees
    Competition
    Trademarks,
    Copyrights and Patents
  ®
  Licensed
    Products
      ITEM 1A.
    Risk
    Factors  The following risk factors as well as the other information
    contained in this report and other filings with the SEC 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.
 5




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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.
    Economic
    conditions could adversely affect the Companys raw
    material prices.
    The
    Companys inability to anticipate and respond to
    consumers tastes and preferences could adversely affect
    the Companys revenues.
    The
    Companys success is dependent upon retaining key
    management personnel.
    The
    Companys business is impacted by general economic
    conditions and related uncertainties affecting markets in which
    the Company operates.
    Currency
    exchange rate fluctuations and other supplier-related risks
    could increase the Companys expenses.
   6




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Changes
    in international trade regulations and other risks associated
    with foreign trade could adversely affect the Companys
    sourcing.
    The
    Companys ability to comply with its financing agreement is
    subject to future performance and other factors.
    The
    Companys debt covenants may affect its liquidity or limit
    its ability to pursue acquisitions, incur debt, make
    investments, sell assets or complete other significant
    transactions.
    The
    strength of the Companys competitors may impact the
    Companys ability to maintain and grow its sales, which
    could decrease the Companys revenues.
    Recalls
    or product liability claims could increase costs or reduce
    sales.
   7




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Customer
    pricing pressures could result in lower selling prices, which
    could negatively affect the Companys operating
    results.
    A
    stockholder could lose all or a portion of his investment in the
    Company.
    ITEM 2.
    Properties    Approximate


Owned/Location

Use

Square Feet


LeasedGonzales, Louisiana

Administrative and sales office


17,761


LeasedBerea, Kentucky(*)

Vacant


53,056


OwnedCompton, California

Offices, warehouse and distribution center


157,400


LeasedCompton, California

Warehouse and distribution center


35,217


LeasedRogers, Arkansas

Sales office


1,625


LeasedShanghai, Peoples Republic of China

Office


1,550


Leased     *
    
    This property is classified as held for sale in the
    Companys consolidated balance sheet (see
    Business in Item 1).  ITEM 3.
    Legal
    Proceedings   8




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PART II
  ITEM 5.
    Market
    For Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Description
    of Securities
    Market
    Information and Price
    Quarter

High


LowFiscal Year 2010First Quarter

$
2.25


$
1.86Second Quarter


3.27



2.65Third Quarter


3.45



2.50Fourth Quarter


3.50



2.56Fiscal Year 2009First Quarter

$
4.08


$
3.23Second Quarter


3.97



3.29Third Quarter


3.35



2.15Fourth Quarter


2.65



1.77   Holders
    of Common Stock
    Dividends
   9




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Securities
    Authorized for Issuance under Equity Compensation
    Plans
    Number ofSecurities to be





Number ofIssued Upon


Weighted-Average


SecuritiesExercise of


Exercise Price of


Remaining AvailableOutstanding


Outstanding


for Future IssuanceOptions, Warrants


Options, Warrants


Under EquityPlan Category

and Rights


and Rights


Compensation PlansEquity compensation plans approved by security holders:2006 Omnibus Incentive Plan


686,000


$
3.39



800,000   ITEM 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Results
    of Operations
    2010


2009


Change


ChangeNet sales by categoryBedding, blankets and accessories

$
66,378


$
71,892


$
(5,514
)


(7.7
)%Bibs, bath and disposable products


19,688



15,506



4,182



27.0
%Total net sales


86,066



87,398



(1,332
)


(1.5
)%Cost of products sold


65,837



68,488



(2,651
)


(3.9
)%Gross profit


20,229



18,910



1,319



7.0
%% of net sales


23.5
%


21.6
%Marketing and administrative expenses


11,469



10,954



515



4.7
%% of net sales


13.3
%


12.5
%Goodwill impairment charge






22,884



(22,884
)


(100.0
)%Interest expense


692



1,089



(397
)


(36.5
)%Other income (expense)


(63
)


108



(171
)


(158.3
)%Income tax expense


3,103



1,133



1,970



173.9
%Income (loss) from continuing operations after taxes


4,902



(17,042
)


21,944



(128.8
)%Discontinued operations  net of taxes


(122
)


(44
)


(78
)


177.3
%Net income (loss)


4,780



(17,086
)


21,866



(128.0
)%% of net sales


5.6
%


(19.5
)%   Net Sales:
   10




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Gross Profit:
  Marketing and Administrative
    Expenses:
  Goodwill Impairment Charge:
  Interest Expense:
    Known
    Trends and Uncertainties
    Financial
    Position, Liquidity and Capital Resources
   11




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March 28,


March 29,2010


2009Revolving line of credit

$
1,422


$
20,062Term loan






1,667Non-interest bearing notes


4,000



4,000Original issue discount


(232
)


(494
)5,190



25,235Less current maturities


1,952



1,667$
3,238


$
23,568     Revolving Line of Credit sub-limit sub-limit
 12




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Subordinated Notes
    FiscalYear

Revolver


Sub Notes


Total2011

$



$
2,000


$
2,0002012






2,000



2,0002013










2014


1,422







1,422Total

$
1,422


$
4,000


$
5,422     Critical
    Accounting Policies and Estimates
    Use of Estimates:
  Revenue Recognition:
 13




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Allowances Against Accounts Receivable: agreed-upon
    Depreciation and Amortization:
  Valuation of Long-Lived Assets, Identifiable Intangible
    Assets and Goodwill:
    Royalty Payments:
  Inventory Valuation:
 14




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first-in,
    Provisions for Income Taxes:
      Recently-Issued
    Accounting Standards
  The FASB
    Accounting Standards Codification and The Hierarchy of Generally
    Accepted Accounting Principles, Generally Accepted Accounting Principles
   15




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Fair
    Value Measurement and Disclosures,
  No. 2010-06, Fair Value Measurements and Disclosures (Topic 820):
    Improving Disclosures about Fair Value Measurements 820-10, No. 2010-06
  Financial Instruments
  805-10-65-1, Business
    Combinations
  Subsequent
    Events No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain
    Recognition and Disclosure Requirements No. 2010-09
  ITEM 8.
    Financial
    Statements and Supplementary Data   16




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ITEM 9A(T).
    Controls
    and Procedures  Disclosure
    Controls and Procedures
    Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
      Changes
    in Internal Control Over Financial Reporting
  Rule 13a-15(d)
  PART III
  ITEM 10.
    Directors,
    Executive Officers and Corporate Governance  Regulation S-K Regulation S-K
 17




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##### Table of Contents



Regulation S-K
  ITEM 11.
    Executive
    Compensation    ITEM 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    ITEM 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    ITEM 14.
    Principal
    Accounting Fees and Services    PART IV
  ITEM 15.
    Exhibits
    and Financial Statement Schedules  (a)(1).
    Financial Statements
          -
    Consolidated Statements of Changes in Shareholders Equity
    for the Fiscal Years Ended March 28, 2010 and March 29, 2009      (a)(2).
    Financial Statement Schedule
    Schedule II  Valuation and Qualifying Accounts


Page 19    18




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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 EBalance at


Charged to





Balance atBeginning


(Reversed from)





End ofof Period


Expenses(1)


Deductions(2)


Period(In thousands)Accounts Receivable Valuation Accounts:Year Ended March 29, 2009Allowance for doubtful accounts

$
4


$
(5
)

$
1


$
0Allowance for customer deductions

$
1,264


$
5,002


$
4,685


$
1,581Year Ended March 28, 2010Allowance for doubtful accounts

$
0


$
20


$
16


$
4Allowance for customer deductions

$
1,581


$
5,970


$
6,317


$
1,234     (1)
    
    Charge to the allowance for doubtful accounts for fiscal year
    2010 represents the allowance recorded in connection with the
    Neat Solutions Acquisition.(2)
    
    Deductions from the allowance for doubtful accounts represent
    the amount of accounts written off reduced by any subsequent
    recoveries. 19




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##### Table of Contents



(a)(3).
    Exhibits
  Regulation S-K
  ExhibitNumber



Description of Exhibits2
.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.(15)2
.2



Purchase Agreement for Bibsters Intellectual Property dated as
    of May 27, 2010 by and between Hamco, Inc. and The Procter
    & Gamble Company.(18)3
.1



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



Bylaws of the Company.(3)4
.1



Instruments defining the rights of security holders are
    contained in the Amended and Restated Certificate of
    Incorporation of the Company.(3)4
.2



Instruments defining the rights of security holders are
    contained in the Bylaws of the Company(3)4
.3



Amended and Restated Rights Agreement dated as of August 6, 2003
    between the Company and SunTrust Bank, as Rights Agent,
    including the Form of Right Certificate (Exhibit A) and the
    Summary of Rights to Purchase Common Shares (Exhibit B).(2)4
.4



Amendment No. 1 to Amended and Restated Rights Agreement dated
    as of July 12, 2006 between the Company and Computershare
    Investor Services, LLC.(5)4
.5



Crown Crafts, Inc. 2006 Omnibus Incentive Plan (As Amended
    August 11, 2009).(14)4
.6



Form of Incentive Stock Option Agreement.(6)4
.7



Form of Non-Qualified Stock Option Agreement (Employees).(6)4
.8



Form of Non-Qualified Stock Option Agreement (Directors).(6)4
.9



Form of Restricted Stock Grant Agreement (Form A).(6)4
.10



Form of Restricted Stock Grant Agreement (Form B).(6)4
.11



Amendment No. 2 to Amended and Restated Rights Agreement dated
    as of August 30, 2006 between the Company and Computershare
    Investor Services, LLC.(7)4
.12



Amendment No. 3 to Amended and Restated Rights Agreement dated
    as of April 14, 2009 between the Company and Computershare Trust
    Company, N.A.(13)10
.1



Employment Agreement dated July 23, 2001 by and between the
    Company and E. Randall Chestnut.(1)10
.2



Amended and Restated Severance Protection Agreement dated April
    20, 2004 by and between the Company and E. Randall Chestnut.(4)10
.3



Amended and Restated Employment Agreement dated April 20, 2004
    by and between the Company and Amy Vidrine Samson.(4)10
.4



Amended and Restated Employment Agreement dated April 20, 2004
    by and between the Company and Nanci Freeman.(4)10
.5



Financing Agreement dated as of July 11, 2006 by and among the
    Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts
    Infant Products, Inc. and The CIT Group/Commercial Services,
    Inc.(5)10
.6



Stock Pledge Agreement dated as of July 11, 2006 by and among
    the Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts
    Infant Products, Inc. and The CIT Group/Commercial Services,
    Inc.(5)10
.7



Mortgage, Assignment of Leases and Rents, Fixture Filing and
    Security Agreement dated July 11, 2006 from Churchill Weavers,
    Inc. to The CIT Group/Commercial Services, Inc.(5)10
.8



Secured Subordinated Promissory Note dated July 11, 2006 issued
    by the Company to Wachovia Bank, National Association.(5)10
.9



Secured Subordinated Promissory Note dated July 11, 2006 issued
    by the Company to Banc of America Strategic Solutions, Inc.(5)10
.10



Secured Subordinated Promissory Note dated July 11, 2006 issued
    by the Company to The Prudential Insurance Company of
    America.(5) 20




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##### Table of Contents



ExhibitNumber



Description of Exhibits10
.11



Security Agreement dated as of July
    11, 2006 by and among the Company, Churchill Weavers, Inc.,
    Hamco, Inc., Crown Crafts Infant Products, Inc. and Wachovia
    Bank, National Association, as Agent.(5)10
.12



Mortgage, Assignment of Leases and Rents, Fixture Filing and
    Security Agreement dated July 11, 2006 from Churchill Weavers,
    Inc. to Wachovia Bank, National Association, as Agent.(5)10
.13



Noncompetition and Non-Disclosure Agreement dated as of November
    5, 2007 by and between Springs Global US, Inc. and Crown Crafts
    Infant Products, Inc.(8)10
.14



First Amendment to Financing Agreement dated as of November 5,
    2007 by and among Crown Crafts, Inc., Churchill Weavers, Inc.,
    Hamco, Inc., Crown Crafts Infant Products, Inc. and The CIT
    Group/Commercial Services, Inc.(8)10
.15



First Amendment to Mortgage, Assignment of Leases and Rents, and
    Security Agreement dated November 5, 2007 from Churchill
    Weavers, Inc. to The CIT Group/Commercial Services, Inc.(8)10
.16



Letter Agreement dated as of January 29, 2008 between the
    Company and Wellington Management Company, LLP.(9)10
.17



Governance and Standstill Agreement dated July 1, 2008 by and
    among Crown Crafts, Inc., Wynnefield Partners Small Cap Value,
    L.P., Wynnefield Partners Small Cap Value, L.P. I,
    Wynnefield Partners Small Cap Value Offshore Fund, Ltd., Channel
    Partnership II, L.P., Wynnefield Capital Management, LLC,
    Wynnefield Capital, Inc., Nelson Obus and Joshua Landes.(10)10
.18



Employment Agreement dated November 6, 2008 by and between the
    Company and Olivia W. Elliott(11)10
.19



First Amendment to Employment Agreement dated November 6, 2008
    by and between the Company and E. Randall Chestnut.(12)10
.20



First Amendment to Amended and Restated Severance Protection
    Agreement dated November 6, 2008 by and between the Company and
    E. Randall Chestnut.(12)10
.21



First Amendment to Amended and Restated Employment Agreement
    dated November 6, 2008 by and between the Company and Amy
    Vidrine Samson.(12)10
.22



First Amendment to Amended and Restated Employment Agreement
    dated November 6, 2008 by and between the Company and Nanci
    Freeman.(12)10
.23



Third Amendment to Financing Agreement dated as of July 2, 2009
    by and among Crown Crafts, Inc., Churchill Weavers, Inc., Hamco,
    Inc., Crown Crafts Infant Products, Inc. and The CIT
    Group/Commercial Services, Inc.(15)10
.24



Fifth Amendment to Financing Agreement dated as of February 9,
    2010 by and among Crown Crafts, Inc., Churchill Weavers, Inc.,
    Hamco, Inc., Crown Crafts Infant Products, Inc. and The CIT
    Group/Commercial Services, Inc.(16)10
.25



Sixth Amendment to Financing Agreement dated as of March 5, 2010
    by and among Crown Crafts, Inc., Churchill Weavers, Inc., Hamco,
    Inc., Crown Crafts Infant Products, Inc. and The CIT
    Group/Commercial Services, Inc.(17)10
.26



Seventh Amendment to Financing Agreement dated as of May 27,
    2010 by and among Crown Crafts, Inc., Churchill Weavers, Inc.,
    Hamco, Inc., Crown Crafts Infant Products, Inc. and The CIT
    Group/Commercial Services, Inc.(18)14
.1



Code of Ethics.(4)21
.1



Subsidiaries of the Company.(19)23
.1



Consent of KPMG LLP.(19)31
.1



Rule 13a-14(a)/15d-14(a) Certification by the Companys
    Chief Executive Officer.(19)31
.2



Rule 13a-14(a)/15d-14(a) Certification by the Companys
    Chief Financial Officer.(19)32
.1



Section 1350 Certification by the Companys Chief Executive
    Officer.(19)32
.2



Section 1350 Certification by the Companys Chief Financial
    Officer.(19)     (1)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated July 23, 2001.(2)
    
    Incorporated herein by reference to Registrants
    Registration Statement on
    Form 8-A/A
    dated August 13, 2003. 21




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##### Table of Contents



(3)
    
    Incorporated herein by reference to Registrants Quarterly
    Report on
    Form 10-Q
    for the quarter ended December 28, 2003.(4)
    
    Incorporated herein by reference to Registrants Annual
    Report on
    Form 10-K
    for the fiscal year ended March 28, 2004.(5)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated July 17, 2006.(6)
    
    Incorporated herein by reference to Registrants
    Registration Statement on
    Form S-8
    dated August 24, 2006.(7)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated August 30, 2006.(8)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated November 9, 2007.(9)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated January 29, 2008.(10)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated July 1, 2008.(11)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K/A
    dated November 7, 2008.(12)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated November 7, 2008.(13)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated April 16, 2009.(14)
    
    Incorporated herein by reference to Registrants Proxy
    Statement on Schedule 14A dated July 3, 2009.(15)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated July 6, 2009.(16)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated February 10, 2010.(17)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated March 8, 2010.(18)
    
    Incorporated herein by reference to Registrants Current
    Report on
    Form 8-K
    dated May 27, 2010.(19)
    
    Filed herewith. 22




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##### Table of Contents



SIGNATURES
    CROWN CRAFTS, INC.
  By:
    /s/  E.
    Randall Chestnut   Chairman of the Board, President and Chief
 Executive Officer
    Signatures

Title

Date/s/  E.
    Randall ChestnutE.
    Randall Chestnut

Chairman of the Board,
    President and Chief Executive Officer (Principal Executive
    Officer)

June 22, 2010/s/  William
    T. Deyo, Jr.William
    T. Deyo, Jr.

Director

June 22, 2010/s/  Zenon
    S. NieZenon
    S. Nie

Director

June 22, 2010/s/  Donald
    RatajczakDonald
    Ratajczak

Director

June 22, 2010/s/  Joseph
    KlingJoseph
    Kling

Director

June 22, 2010/s/  Frederick
    G. WassermanFrederick
    G. Wasserman

Director

June 22, 2010/s/  Olivia
    W. ElliottOlivia
    W. Elliott

Vice President and Chief Financial Officer (Principal Financial
    Officer and
    Principal Accounting Officer)

June 22, 2010  23




---



##### 



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 March 28,
    2010 and March 29, 2009


F-2Consolidated Statements of Income for the Fiscal
    Years Ended March 28, 2010 and March 29, 2009


F-3Consolidated Statements of Changes in
    Shareholders Equity for the Fiscal Years Ended
    March 28, 2010 and March 29, 2009


F-4Consolidated Statements of Cash Flows for the
    Fiscal Years Ended March 28, 2010 and March 29,
    2009


F-5Notes to Consolidated Financial Statements


F-6EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   24




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           KPMG
    LLP
    F-1




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##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
 March 28, 2010 and March 29, 2009
  March 28, 2010


March 29, 2009(Amounts in thousands, except share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
75


$
15,249Accounts receivable (net of allowances of $1,238 at
    March 28, 2010 and $1,581 at March 29, 2009):Due from factor


17,633



17,341Other


388



1,613Inventories


10,453



11,751Prepaid expenses


1,625



1,070Temporary investments  restricted


505



Assets held for sale


396



550Deferred income taxes


399



921Total current assets


31,474



48,495Property, plant and equipment  at cost:Vehicles


58



44Land, buildings and improvements


212



205Machinery and equipment


2,537



2,476Furniture and fixtures


764



7653,571



3,490Less accumulated depreciation


3,020



2,816Property, plant and equipment  net


551



674Other assets:Goodwill


864



Intangible assets, net


6,493



5,515Deferred income taxes


1,904



1,655Other


106



188Total other assets


9,367



7,358Total Assets

$
41,392


$
56,527LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
5,563


$
6,118Accrued wages and benefits


838



894Accrued royalties


1,051



1,056Other accrued liabilities


1,253



813Current maturities of long-term debt


1,952



1,667Total current liabilities


10,657



10,548Non-current liabilities:Long-term debt


3,238



23,568Commitments and contingencies






Shareholders equity:Preferred stock  $0.01 par value per share;
    Authorized 1,000,000 shares; No shares issued at
    March 28, 2010 and March 29, 2009






Common stock  $0.01 par value per share;
    Authorized 74,000,000 shares; Issued 10,288,940 shares
    at March 28, 2010 and 10,098,441 shares at
    March 29, 2009


103



101Additional paid-in capital


41,007



39,995Treasury stock  at cost 
    1,074,025 shares at March 28, 2010 and
    889,051 shares at March 29, 2009


(3,580
)


(3,056
)Accumulated deficit


(10,033
)


(14,629
)Total shareholders equity


27,497



22,411Total Liabilities and Shareholders Equity

$
41,392


$
56,527    F-2




---



##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEFiscal Years Ended March 28, 2010 and
    March 29, 2009
  2010


2009(Amounts in thousands, except per share amounts)Net sales

$
86,066


$
87,398Cost of products sold


65,837



68,488Gross profit


20,229



18,910Marketing and administrative expenses


11,469



10,954Goodwill impairment charge






22,884Income (loss) from operations


8,760



(14,928
)Other income (expense):Interest and amortization of debt discount and expense


(692
)


(1,089
)Other  net


(63
)


108Income (loss) before income tax expense


8,005



(15,909
)Income tax expense


3,103



1,133Income (loss) from continuing operations


4,902



(17,042
)Loss from discontinued operations  net of income taxes


(122
)


(44
)Net income (loss)

$
4,780


$
(17,086
)Weighted average shares outstanding  basic


9,193



9,317Weighted average shares outstanding  diluted


9,295



9,317Basic earnings (loss) per share:Income (loss) from continuing operations

$
0.53


$
(1.83
)Loss from discontinued operations  net of income taxes


(0.01
)


Total basic earnings (loss) per share

$
0.52


$
(1.83
)Diluted earnings (loss) per share:Income (loss) from continuing operations

$
0.53


$
(1.83
)Loss from discontinued operations  net of income taxes


(0.01
)


Total diluted earnings (loss) per share

$
0.52


$
(1.83
)    F-3




---



##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN
    SHAREHOLDERS EQUITYFiscal years ended March 28, 2010 and
    March 29, 2009
  RetainedCommon Shares


Treasury Shares


Additional


Earnings


TotalNumber of





Number of





Paid-in


(Accumulated


ShareholdersShares


Amount


Shares


Amount


Capital


Deficit)


Equity(Dollar amounts in thousands)Balances  March 30, 2008


10,039,942


$
100



(562,647
)

$
(2,071
)

$
39,247


$
2,457


$
39,733Issuance of shares


58,499



1











19







20Stock-based compensation


















707







707Tax effect of stock-based compensation


















22







22Purchase of treasury stock










(326,404
)


(985
)










(985
)Net loss






















(17,086
)


(17,086
)Balances  March 29, 2009


10,098,441



101



(889,051
)


(3,056
)


39,995



(14,629
)


22,411Issuance of shares


190,499



2











163







165Stock-based compensation


















760







760Tax effect of stock-based compensation


















89







89Purchase of treasury stock










(184,974
)


(524
)










(524
)Net income






















4,780



4,780Dividends declared






















(184
)


(184
)Balances  March 28, 2010


10,288,940


$
103



(1,074,025
)

$
(3,580
)

$
41,007


$
(10,033
)

$
27,497    F-4




---



##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 Fiscal Years Ended March 28, 2010 and March 29,
    2009
  2010


2009(Amounts in thousands)Operating activities:Net income (loss)

$
4,780


$
(17,086
)Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Depreciation of property, plant and equipment


286



285Amortization of intangibles


1,544



1,745Impairment charge  goodwill






22,884Impairment charge  assets held for sale


154



94Deferred income taxes


273



(2,094
)Loss (gain) on sale of property, plant and equipment


16



(65
)Accretion of interest expense to original issue discount


262



244Accretion of interest income to temporary investment 
    restricted


(5
)


Stock-based compensation


760



707Tax shortfall from stock-based compensation


(13
)


Changes in assets and liabilities:Accounts receivable


1,770



(618
)Inventories


1,846



2,026Prepaid expenses


(503
)


(6
)Other assets


30



(99
)Accounts payable


(1,088
)


504Accrued liabilities


379



(150
)Net cash provided by (used in) operating activities


10,491



8,371Investing activities:Capital expenditures


(165
)


(372
)Purchase of temporary investments


(500
)


(Cost of) proceeds from disposition of assets


(2
)


86Payment to acquire the assets of Neat Solutions, Inc., net of
    liabilities assumed


(4,434
)


Net cash (used in) provided by investing activities


(5,101
)


(286
)Financing activities:Payments on long-term debt


(1,667
)


(2,503
)(Repayments) proceeds under revolving line of credit, net


(18,640
)


2,680Purchase of treasury stock


(524
)


(985
)Issuance of common stock


165



20Excess tax benefit from stock-based compensation


102



22Net cash (used in) provided by financing activities


(20,564
)


(766
)Net (decrease) increase in cash and cash equivalents


(15,174
)


7,319Cash and cash equivalents at beginning of period


15,249



7,930Cash and cash equivalents at end of period

$
75


$
15,249Supplemental cash flow information:Income taxes paid

$
2,304


$
2,854Interest paid


437



746Noncash investing activity:Adjustment to purchase price of Springs Baby Products from
    resolution of
    pre-acquisition
    contingency






(58
)Noncash financing activity:Dividends declared but unpaid


(184
)


    F-5




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes
    to Consolidated Financial Statements
 Fiscal Years Ended March 28, 2010 and March 29,
    2009
  Note 1 
    Description
    of Business    Note 2 
    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.  Depreciation and Amortization:
  Valuation of Long-Lived Assets, Identifiable Intangible
    Assets and Goodwill:
 F-6




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Revenue Recognition:
  Allowances Against Accounts Receivable: agreed-upon
    Inventory Valuation: first-in,
 F-7




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Segments and Related Information:
  Royalty Payments:
  Provisions for Income Taxes:
    Earnings (Loss) Per Share:
 F-8




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2010


2009(Amounts in thousands, except per share data)Income (loss) from continuing operations

$
4,902


$
(17,042
)Loss from discontinued operations


(122
)


(44
)Net income (loss)

$
4,780


$
(17,086
)Weighted average number of common shares outstanding:Basic


9,193



9,317Effect of dilutive securities


102



Diluted


9,295



9,317Basic earnings (loss) per common share:Continuing operations

$
0.53


$
(1.83
)Discontinued operations


(0.01
)


Total

$
0.52


$
(1.83
)Diluted earnings (loss) per common share:Continuing operations

$
0.53


$
(1.83
)Discontinued operations


(0.01
)


Total

$
0.52


$
(1.83
)   Recently-Issued Accounting Standards: The FASB
    Accounting Standards Codification and The Hierarchy of Generally
    Accepted Accounting Principles, Generally Accepted Accounting Principles
    Fair
    Value Measurement and Disclosures,
 F-9




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  No. 2010-06, Fair Value Measurements and Disclosures (Topic 820):
    Improving Disclosures about Fair Value Measurements 820-10, No. 2010-06
  Financial Instruments
  805-10-65-1, Business
    Combinations
  Subsequent
    Events No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain
    Recognition and Disclosure Requirements No. 2010-09
  Note 3 
    Acquisition  ® Stay-in-Place ®
   F-10




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      AmountTangible assets:Accounts receivable

$
837Inventory


548Prepaid expenses


52Fixed assets


12Other assets


2Total tangible assets


1,451Amortizable intangible assets:Trademarks


892Designs


33Non-compete covenant


241Customer relationships


1,302Total amortizable intangible assets


2,468Goodwill


864Total acquired assets


4,783Liabilities assumed  accounts payable


349Net acquisition cost

$
4,434   Note 4 
    Temporary
    Investments  Restricted    Note 5 
    Discontinued
    Operations   F-11




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      2010


2009(Amounts in thousands)Loss from discontinued operations

$
(37
)

$
(48
)Gain from sale of property






67Impairment charge


(154
)


(94
)(191
)


(75
)Income tax benefit


(69
)


(31
)Net loss from discontinued operations

$
(122
)

$
(44
)   Note 6 
    Goodwill
    and Other Intangible Assets  Goodwill:
      Other Intangible Assets:
 F-12




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Estimated




Amortization ExpenseCarrying


Useful

Accumulated


Fiscal Year EndedAmount


Life

Amortization


March 28, 2010


March 29, 2009Kimberly Grant Acquisition on December 29, 2006:Tradename

$
466


15 years

$
101


$
31


$
31Existing designs


36


1 year


36







Non-compete covenant


98


15 years


21



7



7Total Kimberly Grant Acquisition


600





158



38



38Springs Baby Products Acquisition on November 5, 2007:Licenses & existing designs


1,655


2 years


1,655



483



827Licenses & future designs


1,847


4 years


1,116



462



462Non-compete covenant


115


4 years


69



28



29Customer relationships


3,781


10 years


914



376



378Total Springs Baby Acquisition


7,398





3,754



1,349



1,696Neat Solutions Acquisition on July 2, 2009:Trademarks


892


15 years


45



45



Designs


33


4 years


6



6



Non-compete covenant


241


5 years


36



36



Customer relationships


1,302


16 years


61



61



Total Neat Solutions Acquisition


2,468





148



148



Internally developed intangible assets


113


10 years


26



9



11Total other intangible assets

$
10,579




$
4,086


$
1,544


$
1,745  F-13




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2011


2012


2013


2014


2015Kimberly Grant Acquisition:Tradename

$
31


$
31


$
31


$
31


$
31Existing designs


7



7



7



7



7Total Kimberly Grant Acquisition


38



38



38



38



38Springs Baby Products Acquisition:Licenses & future designs


462



269











Non-compete covenant


29



17











Customer relationships


378



378



378



378



378Total Springs Baby Acquisition


869



664



378



378



378Neat Solutions Acquisition:Trademarks


60



60



60



60



60Designs


8



8



8



3



Non-compete covenant


48



48



48



48



13Customer relationships


81



81



81



81



81Total Neat Solutions Acquisition


197



197



197



192



154Internally developed intangible assets


11



11



11



11



11Total other intangible assets

$
1,115


$
910


$
624


$
619


$
581   Note 7 
    Inventories    March 28, 2010


March 29, 2009Raw Materials

$
66


$
30Finished Goods


10,387



11,721Total inventory

$
10,453


$
11,751   Note 8 
    Financing
    Arrangements  Factoring Agreements:
 F-14




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Notes Payable and Other Credit Facilities:
  March 28, 2010


March 29, 2009Revolving line of credit

$
1,422


$
20,062Term loan






1,667Non-interest bearing notes


4,000



4,000Original issue discount


(232
)


(494
)5,190



25,235Less current maturities


1,952



1,667$
3,238


$
23,568     Revolving Line of Credit sub-limit sub-limit
    Subordinated Notes
    FiscalYear

Revolver


Sub Notes


Total2011

$



$
2,000


$
2,0002012






2,000



2,0002013










2014


1,422







1,422Total

$
1,422


$
4,000


$
5,422  F-15




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 9 
    Income
    Taxes    Fiscal Year Ended March 28, 2010Current


Deferred


TotalFederal

$
2,344


$
91


$
2,435State


427



234



661Other, including foreign


7







7Income tax expense on continuing operations


2,778



325



3,103Income tax benefit on discontinued operations


(17
)


(52
)


(69
)Income tax reported in stockholders equity related tostock-based compensation


(89
)






(89
)Total income tax

$
2,672


$
273


$
2,945   Fiscal Year Ended March 29, 2009Current


Deferred


TotalFederal

$
2,667


$
(1,769
)

$
898State


507



(279
)


228Other, including foreign


7







7Income tax expense (benefit) on continuing operations


3,181



(2,048
)


1,133Income tax expense (benefit) on discontinued operations


15



(46
)


(31
)Income tax reported in stockholders equity related tostock-based compensation






22



22Total income tax

$
3,196


$
(2,072
)

$
1,124  F-16




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    March 28, 2010


March 29, 2009Deferred tax assets:Employee benefit accruals

$
303


$
342Accounts receivable and inventory reserves


356



579Deferred rent


55



Goodwill


288



367Other intangible assets


987



686State net operating loss carryforwards


913



1,104Stock-based compensation


672



626Total gross deferred tax assets


3,574



3,704Less valuation allowance


(913
)


(1,104
)Deferred tax assets after valuation allowance


2,661



2,600Deferred tax liabilities:Prepaid expenses


(313
)


Property, plant and equipment


(45
)


(24
)Total deferred tax liabilities


(358
)


(24
)Net deferred income tax assets

$
2,303


$
2,576        F-17




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2010


2009Tax expense (benefit) at statutory rate (34%)

$
2,722


$
(5,409
)State income taxes, net of Federal income tax benefit


351



195Change in deferred taxes due to a change in state tax rate


85



Tax credits


(12
)


(152
)Nondeductible expenses


10



12Goodwill impairment






6,533Other


(53
)


(46
)Income tax expense on continuing operations

$
3,103


$
1,133   Note 10 
    Retirement
    Plans    Note 11 
    Stock-based
    Compensation      Compensation  Stock Compensation
 F-18




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Stock Options:
  Weighted-Average


Number of OptionsExercise Price


OutstandingOutstanding at March 29, 2009

$
2.54



819,831Granted


3.02



170,000Exercised


(1.03
)


(160,499
)Forfeited


(0.53
)


(3,500
)Outstanding at March 28, 2010


2.94



825,832Exercisable at March 28, 2010


2.80



555,832     Fiscal Year EndedMarch 28, 2010

March 29, 2009Options issued

170,000

200,000Grant Date

August 12, 2009

June 10, 2008Dividend yield



Expected volatility

50.00%

55.00%Risk free interest rate

2.70%

3.54%Expected life in years

5.75

5.75Forfeiture rate

5.00%

5.00%Exercise price (grant-date closing price)

$3.02

$3.58Fair value

$1.49

$1.94       Cost of


Marketing &Products


Administrative


TotalOptions Granted in Fiscal Year

Sold


Expenses


Expense2008

$
16


$
41


$
572009


48



145



1932010


22



52



74Total stock option compensation

$
86


$
238


$
324  F-19




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Cost of


Marketing &Products


Administrative


TotalOptions Granted in Fiscal Year

Sold


Expenses


Expense2007

$
23


$
71


$
942008


38



97



1352009


36



108



144Total stock option compensation

$
97


$
276


$
373     Weighted Avg.


Weighted Avg.





Weighted Avg.Number


Remaining


Exercise Price


Number of


Exercise Priceof Options


Contractual


of Options


Shares


of OptionsRange of Exercise Prices

Outstanding


Life in Years


Outstanding


Exercisable


Exercisable$0.18-$0.71


121,832



2.70


$
0.67



121,832


$
0.67$1.06-$1.19


18,000



0.34


$
1.11



18,000


$
1.11$3.02


170,000



9.38


$
3.02






$
$3.15


206,000



6.27


$
3.15



206,000


$
3.15$3.58


200,000



8.21


$
3.58



100,000


$
3.58$3.90-$4.08


110,000



6.93


$
4.08



110,000


$
4.08825,832











555,832     Non-vested Stock:
     F-20




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Note 12 
    Stockholders
    Equity  Dividends:
  Stock Repurchases:
    
    Fiscal year 2010:  On August 12, 2009,
    Mr. Chestnut surrendered to the Company 67,920 shares
    of common stock having a market value of $3.02 per share to
    satisfy the income tax withholding obligations relating to the
    vesting of shares of restricted stock. During December 2009,
    several employees surrendered to the Company 92,054 shares
    of common stock having a weighted-average market value of $2.68
    per share to satisfy the exercise price and income tax
    withholding obligations relating to the exercise of stock
    options.
    Fiscal year 2009:  In privately-negotiated
    transactions, the Company repurchased shares of its common stock
    as follows:  
    100,000 shares at a purchase price, including broker fees,
    of $2.68 per share on October 14, 2008, and
    109,755 shares at a purchase price, including broker fees,
    of $2.69 per share on November 3, 2008.  Note 13 
    Subsequent
    Events    Acquisition: ® ® ®
   F-21




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Note 14 
    Major
    Customers    Fiscal Year2010


2009Wal-Mart Stores, Inc.


43
%


47
%Toys R Us


21
%


21
%Target Corporation


*



10
%     *
    
    Amount represented less than 10% of the Companys gross
    sales for this fiscal year.  Note 15 
    Commitments
    and Contingencies        Note 16 
    Current
    Economic Conditions   F-22