##### Table of Contents









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 1934    
|          
|           |  | For the fiscal year ended April 3, 2005                                                     
|          
|OR        
|          
|o          |  | 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 Registered
|                              |  |                                     
|Common Stock, $0.01 par value |  | OTC Bulletin Board                  
|Common Share Purchase Rights  |  | OTC Bulletin Board                  

Securities registered pursuant to Section 12(g) of the
Act:


None


þ o


þ


o þ






Documents Incorporated by Reference:












---

TABLE OF CONTENTS



|                                                         |                                                                                                                     |  |  |  |  |  |  | 
|-------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                  
|                                                         | ITEM 1. Business                                                                                                   
|                                                         | ITEM 2. Properties                                                                                                 
|                                                         | 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
|                                                         | ITEM 6. Selected Financial Data                                                                                    
|                                                         | ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations                      
|                                                         | ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk                                                
|                                                         | 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                                                                                   
|                                                         | ITEM 9B. Other Information                                                                                         
|PART III                                                
|                                                         | ITEM 10. Directors and Executive Officers of the Registrant                                                        
|                                                         | 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                                                            
|                                                         | ITEM 14. Principal Accountant Fees and Services                                                                    
|PART IV                                                 
|                                                         | ITEM 15. Exhibits and Financial Statement Schedules                                                                
|SIGNATURES                                              
|                                                         | ITEM 8. Financial Statements and Supplementary Data                                                                
|Subsidiaries of the Company                             
|Consent of Independent Registered Public Accounting Firm
|Rule 13a-14(a)/15d-14(d) Certification by CEO           
|Rule 13a-14(a)/15d-14(d) Certification by CFO           
|Section 1350 Certification by CEO                       
|Section 1350 Certification by CFO                       



---



##### Table of Contents






PART I







|        |         
|------- | --------
|ITEM 1. | Business



Products




Product Design and Styling




Raw Materials






Product Sourcing




2



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##### Table of Contents







Sales and Marketing








Customers




|                      |  |             |    |   |      |  |    |      |  |  |    |  
|--------------------- |  | ----------- | -- | - | ---- |  | -- | ---- |  |  | -- | -
|                      |  | Fiscal Year |   
|                      |  |             |   
|                      |  | 2005        |    |   | 2004 |  |    | 2003 | 
|                      |  |             |    |   |      |  |    |      | 
|Toys R Us             |  |             | 36 | % |      |  | 36 | %    |  |  | 31 | %
|Wal-Mart Stores, Inc. |  |             | 29 | % |      |  | 27 | %    |  |  | 30 | %
|Target Corporation    |  |             | 12 | % |      |  | 12 | %    |  |  | 10 | %

Seasonality and Inventory Management






Order Backlog




3



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##### Table of Contents





Trademarks, Copyrights and Patents










Competition




Government Regulation and Environmental Control




Employees




4



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##### Table of Contents





International Sales









|        |           
|------- | ----------
|ITEM 2. | Properties





|                             |  |                                                                                    |  |             |         |  |        |       
|---------------------------- |  | ---------------------------------------------------------------------------------- |  | ----------- | ------- |  | ------ | ------
|                             |  |                                                                                    |  | Approximate |         |  | Owned/
|Location                     |  | Use                                                                                |  | Square Feet |         |  | Leased
|                             |  |                                                                                    |  |             |         |  |       
|Gonzales, Louisiana          |  | Administrative and sales office                                                    |  |             | 17,761  |  |        | Leased
|Berea, Kentucky              |  | Offices, manufacturing, warehouse and distribution facilities
    and retail store |  |             | 53,000  |  |        | Owned 
|Compton, California          |  | Offices, warehouse and distribution center                                         |  |             | 157,400 |  |        | Leased
|Gonzales, Louisiana          |  | Offices, warehouse and distribution center                                         |  |             | 60,000  |  |        | Leased
|Huntington Beach, California |  | Offices                                                                            |  |             | 9,803   |  |        | Leased
|Rogers, Arkansas             |  | Sales office                                                                       |  |             | 1,625   |  |        | Leased








|        |                  
|------- | -----------------
|ITEM 3. | Legal Proceedings








|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | Submission of Matters to a Vote of Security Holders



5



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##### Table of Contents






PART II







|        |                                                                                                                    
|------- | -------------------------------------------------------------------------------------------------------------------
|ITEM 5. | Market For Registrants Common Stock, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities





|               |  |      |      |  |     |   |      | 
|-------------- |  | ---- | ---- |  | --- | - | ---- | 
|Quarter        |  | High |      |  | Low |  
|               |  |      |      |  |     |  
|Fiscal 2005    |  |      |      |  |     |   |      | 
|First Quarter  |  | $    | 0.79 |  |     | $ | 0.52 | 
|Second Quarter |  |      | 0.78 |  |     |   | 0.47 | 
|Third Quarter  |  |      | 0.57 |  |     |   | 0.43 | 
|Fourth Quarter |  |      | 0.69 |  |     |   | 0.43 | 
|Fiscal 2004    |  |      |      |  |     |   |      | 
|First Quarter  |  | $    | 0.90 |  |     | $ | 0.46 | 
|Second Quarter |  |      | 0.95 |  |     |   | 0.62 | 
|Third Quarter  |  |      | 0.80 |  |     |   | 0.47 | 
|Fourth Quarter |  |      | 0.80 |  |     |   | 0.50 | 



Equity Compensation Plans




|                                                        |                                |                   |  |         |                  |  |   |                    |  |  |  |         | 
|------------------------------------------------------- | ------------------------------ | ----------------- |  | ------- | ---------------- |  | - | ------------------ |  |  |  | ------- | 
|                                                        |                                | Number of         |  |         | Weighted-        |  |   | Number of          | 
|                                                        |                                | Securities to be  |  |         | Average Exercise |  |   | Securities         | 
|                                                        |                                | Issued Upon       |  |         | Price of         |  |   | Remaining          | 
|                                                        |                                | Exercise of       |  |         | Outstanding      |  |   | Available for      | 
|                                                        |                                | Outstanding       |  |         | Options,         |  |   | Future Issuance    | 
|                                                        |                                | Options, Warrants |  |         | Warrants and     |  |   | Under Equity       | 
|Plan Category                                           |                                | and Rights        |  |         | Rights           |  |   | Compensation Plans | 
|                                                        |                                |                   |  |         |                  |  |   |                    | 
|Equity compensation plans approved by security holders: |                                |                   |  |         |                  |  |   |                    |  |  |  |        
|                                                        | Amended 1995 Stock Option Plan |                   |  | 534,350 |                  |  | $ | 0.81               |  |  |  | 462,150 | 

6



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|        |                        
|------- | -----------------------
|ITEM 6. | Selected Financial Data



|                                    |  |                                     |        |  |      |   |        |      |  |   |        |  |  |      |         |  |  |   |         |  
|----------------------------------- |  | ----------------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------- |  |  | - | ------- | -
|                                    |  | Fiscal Year                         |       
|                                    |  |                                     |       
|                                    |  | 2005                                |        |  | 2004 |   |        | 2003 |  |   | 2002   |  |  | 2001 |        
|                                    |  |                                     |        |  |      |   |        |      |  |   |        |  |  |      |        
|                                    |  | In thousands, except per share data |       
|For the year                        |  |                                     |        |  |      |   |        |      |  |   |        |  |  |      |         |  |  |   |         |  
|Net sales                           |  | $                                   | 83,908 |  |      | $ | 86,227 |      |  | $ | 94,735 |  |  | $    | 117,591 |  |  | $ | 247,515 |  
|Gross profit                        |  |                                     | 17,025 |  |      |   | 19,594 |      |  |   | 21,420 |  |  |      | 25,928  |  |  |   | 18,542  |  
|Income (loss) from operations       |  |                                     | 6,237  |  |      |   | 7,434  |      |  |   | 6,959  |  |  |      | 5,022   |  |  |   | (59,555 | )
|Net income (loss)                   |  |                                     | 2,438  |  |      |   | 3,103  |      |  |   | 2,487  |  |  |      | 27,002  |  |  |   | (73,587 | )
|Basic net income (loss) per share   |  |                                     | 0.26   |  |      |   | 0.33   |      |  |   | 0.26   |  |  |      | 2.95    |  |  |   | (8.55   | )
|Diluted net income (loss) per share |  |                                     | 0.11   |  |      |   | 0.14   |      |  |   | 0.12   |  |  |      | 1.37    |  |  |   | (8.55   | )
|Cash dividends per share            |  |                                     |       |  |      |   |       |      |  |   |       |  |  |      |        |  |  |   |        |  
|At year end                         |  |                                     |        |  |      |   |        |      |  |   |        |  |  |      |         |  |  |   |         |  
|Total assets                        |  | $                                   | 54,124 |  |      | $ | 58,387 |      |  | $ | 57,926 |  |  | $    | 60,200  |  |  | $ | 90,678  |  
|Long-term debt                      |  |                                     | 25,085 |  |      |   | 28,447 |      |  |   | 30,895 |  |  |      | 36,773  |  |  |   | 47,650  |  
|Shareholders equity (deficit)      |  |                                     | 20,875 |  |      |   | 18,437 |      |  |   | 15,265 |  |  |      | 12,813  |  |  |   | (16,773 | )






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Results of Operations




|                                      |                                   |                      |        |        |              |  |        |              |  |  |          |        |  |          |        |        |          |  |        |          |    |  |        |        |   |  |        |       |   
|------------------------------------- | --------------------------------- | -------------------- | ------ | ------ | ------------ |  | ------ | ------------ |  |  | -------- | ------ |  | -------- | ------ | ------ | -------- |  | ------ | -------- | -- |  | ------ | ------ | - |  | ------ | ----- | --
|                                      |                                   | Fiscal Year          |        |        | 2005 vs 2004 |  |        | 2004 vs 2003 | 
|                                      |                                   |                      |        |        |              |  |        |              | 
|                                      |                                   | 2005                 |        |        | 2004         |  |        | 2003         |  |  | $ Change |        |  | % Change |        |        | $ Change |  |        | % Change |   
|                                      |                                   |                      |        |        |              |  |        |              |  |  |          |        |  |          |        |        |          |  |        |          |   
|                                      |                                   | Dollars in thousands |       
|Net Sales by Category                 |                                   |                      |        |        |              |  |        |              |  |  |          |        |  |          |        |        |          |  |        |          |    |  |        |        |   |  |        |      
|                                      | Bedding, Blankets and Accessories |                      | $      | 55,792 |              |  | $      | 56,418       |  |  | $        | 64,109 |  |          | $      | (626   | )        |  |        | (1.1     | )% |  | $      | (7,691 | ) |  |        | (12.0 | )%
|                                      | Bibs and Bath                     |                      |        | 24,887 |              |  |        | 26,413       |  |  |          | 26,973 |  |          |        | (1,526 | )        |  |        | (5.8     | )% |  |        | (560   | ) |  |        | (2.1  | )%
|                                      | Handwoven Products                |                      |        | 3,229  |              |  |        | 3,396        |  |  |          | 3,653  |  |          |        | (167   | )        |  |        | (4.9     | )% |  |        | (257   | ) |  |        | (7.0  | )%
|Total Net Sales                       |                                   |                      | 83,908 |        |              |  | 86,227 |              |  |  | 94,735   |        |  |          | (2,319 | )      |          |  | (2.7   | )%       |    |  | (8,508 | )      |   |  | (9.0   | )%   
|Cost of Products Sold                 |                                   |                      | 66,883 |        |              |  | 66,633 |              |  |  | 73,315   |        |  |          | 250    |        |          |  | 0.4    | %        |    |  | (6,682 | )      |   |  | (9.1   | )%   
|Gross Profit                          |                                   |                      | 17,025 |        |              |  | 19,594 |              |  |  | 21,420   |        |  |          | (2,569 | )      |          |  | (13.1  | )%       |    |  | (1,826 | )      |   |  | (8.5   | )%   
|% of Net Sales                        |                                   |                      | 20.3   | %      |              |  | 22.7   | %            |  |  | 22.6     | %      |  |          |        |        |          |  |        |          |    |  |        |        |   |  |        |      
|Marketing and Administrative Expenses |                                   |                      | 10,788 |        |              |  | 12,160 |              |  |  | 12,686   |        |  |          | (1,372 | )      |          |  | (11.3  | )%       |    |  | (526   | )      |   |  | (4.1   | )%   
|% of Net Sales                        |                                   |                      | 12.9   | %      |              |  | 14.1   | %            |  |  | 13.4     | %      |  |          |        |        |          |  |        |          |    |  |        |        |   |  |        |      
|Restructuring Charge                  |                                   |                      |       |        |              |  |       |              |  |  | 1,775    |        |  |          | N/A    |        |          |  | N/A    |          |    |  | (1,775 | )      |   |  | (100.0 | )%   
|Interest Expense                      |                                   |                      | 3,793  |        |              |  | 4,055  |              |  |  | 4,548    |        |  |          | (262   | )      |          |  | (6.5   | )%       |    |  | (493   | )      |   |  | (10.8  | )%   
|Other  net                           |                                   |                      | 99     |        |              |  | (54    | )            |  |  | 340      |        |  |          | 153    |        |          |  | (283.1 | )%       |    |  | (394   | )      |   |  | (115.9 | )%   
|Income Tax Expense                    |                                   |                      | 105    |        |              |  | 222    |              |  |  | 264      |        |  |          | (117   | )      |          |  | (53.0  | )%       |    |  | (42    | )      |   |  | (15.9  | )%   
|Net Income                            |                                   |                      | 2,438  |        |              |  | 3,103  |              |  |  | 2,487    |        |  |          | (665   | )      |          |  | (21.4  | )%       |    |  | 616    |        |   |  | 24.8   | %    
|% of Net Sales                        |                                   |                      | 2.9    | %      |              |  | 3.6    | %            |  |  | 2.6      | %      |  |          |        |        |          |  |        |          |    |  |        |        |   |  |        |      

7



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##### Table of Contents



Net Sales:




Gross Profit:




Marketing and Administrative Expenses:


Restructuring Charge:


Interest Expense:


Financial Position, Liquidity and Capital Resources




8



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|                                           |  |          |        |   |           |   |        |  
|------------------------------------------ |  | -------- | ------ | - | --------- | - | ------ | -
|                                           |  | April 3, |        |   | March 28, |  
|                                           |  | 2005     |        |   | 2004      |  
|                                           |  |          |        |   |           |  
|Senior notes and senior subordinated notes |  | $        | 20,538 |   |           | $ | 24,054 |  
|Floating rate revolving credit facilities  |  |          |       |   |           |   | 1,495  |  
|Non-interest bearing notes                 |  |          | 8,809  |   |           |   | 8,541  |  
|Original issue discount                    |  |          | (1,945 | ) |           |   | (2,627 | )
|                                           |  |          |        |   |           |  
|                                           |  |          | 27,402 |   |           |   | 31,463 |  
|Less current maturities                    |  |          | 2,317  |   |           |   | 3,016  |  
|                                           |  |          |        |   |           |  
|                                           |  | $        | 25,085 |   |           | $ | 28,447 |  
|                                           |  |          |        |   |           |  





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Revolving Creditof up to $19 million, including a
    $3 million sub-limit for letters of credit. The interest
    rate is prime plus 1.00% (6.75% at April 3, 2005) for base
    rate borrowings and LIBOR plus 2.75% (5.62% at April 3,
    2005) for Euro-dollar borrowings. The maturity date is
    June 30, 2005 (see discussion below regarding amendment
    subsequent to year end). The facility is secured by a first lien
    on all assets. There was no balance at April 3, 2005. The
    Company had $14.9 million available at April 3, 2005.
    As of April 3, 2005, letters of credit of $1.3 million
    were outstanding against the $3 million sub-limit for
    letters of credit associated with the $19 million revolving
    credit facility.                                                                                                                                                                                                                        
|
| | Senior Notesof $4.5 million with a fixed interest
    rate of 10% plus additional interest contingent upon cash flow
    availability of 3%. The maturity date is June 30, 2006, and
    the notes are secured by a first lien on all assets. Minimum
    principal payments of $500,000 are due at the end of each
    calendar quarter. In the event that required debt service
    exceeds 85% of free cash flow (EBITDA (as hereinafter defined)
    less capital expenditures and cash taxes paid), the excess of
    contingent interest and principal amortization over 85% will be
    deferred until maturity of the Senior Notes in June 2006.
    Contingent interest plus additional principal payments will be
    due annually up to 85% of free cash flow. On September 30,
    2002, September 30, 2003 and September 30, 2004, the
    Company made payments to the lenders of $1.6 million,
    $1.3 million and $1.3 million, respectively, related
    to excess cash flow.
|
| | Senior Subordinated Notesof $16 million with a
    fixed interest rate of 10% plus an additional 1.65% payable by
    delivery of a promissory note due July 23, 2007 (PIK
    Notes). The maturity date is July 23, 2007, and the
    notes are secured by a second lien on all assets. In addition to
    principal and interest, a payment of $8 million is due on
    the earliest to occur of (i) maturity of the notes,
    (ii) prepayment of the notes, or (iii) sale of the
    Company. The original issue discount of $4.1 million on
    this non-interest bearing obligation at a market interest rate
    of 12% is being amortized over the life of the notes. The
    remaining balance of $1.9 million is included in the
    Consolidated Balance Sheet as of April 3, 2005.                                                                                                                                                                                               



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|       |  |              |       |  |           |   |        |           |  |   |       |  |  |       |    |  |  |   |        | 
|------ |  | ------------ | ----- |  | --------- | - | ------ | --------- |  | - | ----- |  |  | ----- | -- |  |  | - | ------ | 
|Fiscal |  | Senior Notes |       |  | Sub Notes |   |        | PIK Notes |  |   | Other |  |  | Total |   
|       |  |              |       |  |           |   |        |           |  |   |       |  |  |       |   
|2006   |  | $            | 2,300 |  |           | $ |       |           |  | $ |      |  |  | $     | 17 |  |  | $ | 2,317  | 
|2007   |  |              | 2,200 |  |           |   |       |           |  |   |      |  |  |       | 19 |  |  |   | 2,219  | 
|2008   |  |              |      |  |           |   | 24,000 | *         |  |   | 809   |  |  |       | 2  |  |  |   | 24,811 | 
|       |  |              |       |  |           |   |        |           |  |   |       |  |  |       |   
|Total  |  | $            | 4,500 |  |           | $ | 24,000 |           |  | $ | 809   |  |  | $     | 38 |  |  | $ | 29,347 | 
|       |  |              |       |  |           |   |        |           |  |   |       |  |  |       |   






|  |                                                                                                        
|- | -------------------------------------------------------------------------------------------------------
|* | Includes $8 million non-interest bearing note issued at an
    original issue discount of $4.1 million.







|                              |  |                        |        |           |        |   |       |       |  |       |        |  |           |         |    |  |  |   |   | 
|----------------------------- |  | ---------------------- | ------ | --------- | ------ | - | ----- | ----- |  | ----- | ------ |  | --------- | ------- | -- |  |  | - | - | 
|                              |  | Payments Due by Period
|                              |  |                       
|                              |  |                        |        | Less Than |        |   | 1 - 3 |       |  | 3 - 5 |        |  | More Than
|                              |  | Total                  |        |           | 1 Year |   |       | Years |  |       | Years  |  |           | 5 Years
|                              |  |                        |        |           |        |   |       |       |  |       |        |  |           |        
|                              |  | (In thousands)        
|Contractual Obligations       |  |                        |        |           |        |   |       |       |  |       |        |  |           |         |    |  |  |   |   | 
|Long-Term Debt Obligations    |  | $                      | 29,309 |           |        | $ | 2,300 |       |  | $     | 27,009 |  |           | $       |   |  |  | $ |  | 
|Capital Lease Obligations     |  |                        | 38     |           |        |   | 17    |       |  |       | 21     |  |           |         |   |  |  |   |  | 
|Operating Lease Obligations   |  |                        | 1,721  |           |        |   | 1,130 |       |  |       | 571    |  |           |         | 20 |  |  |   |  | 
|Purchase Obligations          |  |                        | 26     |           |        |   | 21    |       |  |       | 5      |  |           |         |   |  |  |   |  | 
|Minimum Royalty Obligations   |  |                        | 2,878  |           |        |   | 2,878 |       |  |       |       |  |           |         |   |  |  |   |  | 
|                              |  |                        |        |           |        |   |       |       |  |       |        |  |           |         |   
|Total Contractual Obligations |  | $                      | 33,972 |           |        | $ | 6,346 |       |  | $     | 27,606 |  |           | $       | 20 |  |  | $ |  | 
|                              |  |                        |        |           |        |   |       |       |  |       |        |  |           |         |   



10



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Critical Accounting Policies




Revenue Recognition:


Sales Returns and Other Allowances and Allowance for Doubtful
Accounts:




Inventory Valuation:




11



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##### Table of Contents







Provisions for Income Taxes:


Valuation of Long-Lived Assets, Identifiable Intangibles and
Goodwill:




Goodwill and Other Intangible Assets.


Recently-Issued Accounting Standards


Accounting for
Costs Associated with Exit or Disposal Activities


Share-Based Payment, an Amendment of FASB Statements
No. 123 and 95


12



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Accounting for Stock
Issued to Employees


Forward-Looking Information









|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 7A. | Quantitative and Qualitative Disclosures About Market
    Risk








|        |                                            
|------- | -------------------------------------------
|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



13



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##### Table of Contents










|         |                  
|-------- | -----------------
|ITEM 9B. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|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








|         |                                       
|-------- | --------------------------------------
|ITEM 14. | Principal Accountant Fees and Services



14



---



##### Table of Contents






PART IV







|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | Exhibits and Financial Statement Schedules

Financial Statements










| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | Consolidated Statements of Income and Comprehensive Income for
    the Three Fiscal Years in the Period Ended April 3, 2005
|
| | Consolidated Statements of Changes in Shareholders Equity
    for the Three Fiscal Years in the Period Ended April 3, 2005





Financial Statement Schedule




|            |  |   |  |                                   |  |  |         | 
|----------- |  | - |  | --------------------------------- |  |  | ------- | 
|Schedule II |  |  |  | Valuation and Qualifying Accounts |  |  | Page 16 | 



15



---



##### Table of Contents



SCHEDULE II


CROWN CRAFTS, INC. AND SUBSIDIARIES


ANNUAL REPORT ON FORM 10-K


|                                          |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|----------------------------------------- |  | --------------------------------- | ----- | ---------- | --------------- |  | ----- | ------------- |  | ---------- | -------- |  |  |  | ----- | 
|                                          |  | Valuation and Qualifying Accounts |      
|                                          |  |                                   |      
|Column A                                  |  | Column B                          |       |            | Column C        |  |       | Column D      |  |            | Column E | 
|                                          |  |                                   |       |            |                 |  |       |               |  |            |          | 
|                                          |  |                                   |       | Charged to |                 |  |       |               | 
|                                          |  | Balance at                        |       |            | Costs and       |  |       |               |  | Balance at |         
|                                          |  | Beginning of                      |       |            | (Reversed from) |  |       |               |  | End of     |         
|                                          |  | Period                            |       |            | Expenses        |  |       | Deductions(1) |  |            | Period   | 
|                                          |  |                                   |       |            |                 |  |       |               |  |            |          | 
|                                          |  | (In thousands)                    |      
|Accounts Receivable Valuation Accounts:   |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Year Ended March 30, 2003                 |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Allowance for doubtful accounts           |  |                                   | 194   |            |                 |  | 172   |               |  |            | 183      |  |  |  | 183   | 
|Allowance for customer deductions         |  |                                   | 1,647 |            |                 |  | 97    |               |  |            |         |  |  |  | 1,744 | 
|Year Ended March 28, 2004                 |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Allowance for doubtful accounts           |  |                                   | 183   |            |                 |  | 66    |               |  |            | 217      |  |  |  | 32    | 
|Allowance for customer deductions         |  |                                   | 1,744 |            |                 |  | 282   |               |  |            |         |  |  |  | 2,026 | 
|Year Ended April 3, 2005                  |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Allowance for doubtful accounts           |  |                                   | 32    |            |                 |  | 4     |               |  |            | 14       |  |  |  | 22    | 
|Allowance for customer deductions         |  |                                   | 2,026 |            |                 |  | (637  | )             |  |            |         |  |  |  | 1,389 | 
|Inventory Valuation Accounts:             |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Year Ended March 30, 2003                 |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Allowance for discontinued and irregulars |  |                                   | 2,169 |            |                 |  | (536  | )             |  |            |         |  |  |  | 1,633 | 
|Year Ended March 28, 2004                 |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Allowance for discontinued and irregulars |  |                                   | 1,633 |            |                 |  | (630  | )             |  |            |         |  |  |  | 1,003 | 
|Year Ended April 3, 2005                  |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Allowance for discontinued and irregulars |  |                                   | 1,003 |            |                 |  | (282  | )             |  |            |         |  |  |  | 721   | 
|Restructuring Reserve:                    |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Year Ended March 30, 2003                 |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Allowance for restructuring costs         |  |                                   | 554   |            |                 |  | 1,775 | (2)           |  |            | 608      |  |  |  | 1,721 | 
|Year Ended March 28, 2004                 |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Allowance for restructuring costs         |  |                                   | 1,721 |            |                 |  |      |               |  |            | 1,691    |  |  |  | 30    | 
|Year Ended April 3, 2005                  |  |                                   |       |            |                 |  |       |               |  |            |          |  |  |  |       | 
|Allowance 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.                                                    

16



---



##### Table of Contents



Exhibits




|        |    |     |  |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | --- |  | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |  |                        
|Number  |    |     |  | Description of Exhibits
|        |    |     |  |                        
|        | 2  | .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)                                                                                                                                                                                                                                                                                               

17



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##### Table of Contents



|        |    |     |  |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | --- |  | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |  |                        
|Number  |    |     |  | Description of Exhibits
|        |    |     |  |                        
|        | 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)                                                                                                                                                                                                                                                                                                  
|       
|        | 10 | .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)                                                                                                                                                                                                                                                                                                                                                                                                                  

18



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##### Table of Contents



|        |    |     |  |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | -- | --- |  | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |  |                        
|Number  |    |     |  | Description of Exhibits
|        |    |     |  |                        
|        | 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)
|       
|        | 10 | .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)   
|       
|        | 14 | .1  |  |                        |  | Code of Ethics(8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 21 |     |  |                        |  | Subsidiaries of the Company(11)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 23 |     |  |                        |  | Consent of Independent Registered Public Accounting
    Firm(11)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 31 | .1  |  |                        |  | Rule 13a-14(a)/15d-14(a) Certification by the
    Companys Chief Executive Officer(11)                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 31 | .2  |  |                        |  | Rule 13a-14(a)/15d-14(a) Certification by the
    Companys Chief Financial Officer(11)                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 32 | .1  |  |                        |  | Section 1350 Certification by the Companys Chief
    Executive Officer(11)                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 32 | .2  |  |                        |  | Section 1350 Certification by the Companys Chief
    Financial Officer(11)                                                                                                                                                                                                                                                                                                                                                                                                                                                          






| |     |                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------
| | (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) | Filed herewith.                                                                                    

19



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##### Table of Contents






SIGNATURES






| |                       
| | ----------------------
| | Crown Crafts,
    Inc.



| |     |                        
| | --- | -----------------------
| | By: | /s/ E. Randall Chestnut

| |                        
| | -----------------------
| |                        
| | E. Randall Chestnut    
| | Chief Executive Officer



|                                                 |  |                                                      |  |               |  | 
|------------------------------------------------ |  | ---------------------------------------------------- |  | ------------- |  | 
|Signatures                                       |  | Title                                                |  | Date         
|                                                 |  |                                                      |  |              
|                                                
|/s/ E. Randall ChestnutE.
    Randall Chestnut   |  | Chief Executive Officer,
    Director                |  | June 14, 2005
|                                                
|/s/ William T. Deyo, Jr.William
    T. Deyo, Jr. |  | Director                                             |  | June 14, 2005
|                                                
|/s/ Steven E. FoxSteven
    E. Fox               |  | Director                                             |  | June 14, 2005
|                                                
|/s/ Sidney KirschnerSidney
    Kirschner         |  | Director                                             |  | June 14, 2005
|                                                
|/s/ Zenon S. NieZenon
    S. Nie                 |  | Director                                             |  | June 14, 2005
|                                                
|/s/ William P. PayneWilliam
    P. Payne         |  | Director                                             |  | June 14, 2005
|                                                
|/s/ Donald RatajczakDonald
    Ratajczak         |  | Director                                             |  | June 14, 2005
|                                                
|/s/ James A. VerbruggeJames
    A. Verbrugge     |  | Director                                             |  | June 14, 2005
|                                                
|/s/ Amy Vidrine SamsonAmy
    Vidrine Samson     |  | Chief Financial Officer
    Chief Accounting Officer |  | June 14, 2005

20



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##### Table of Contents








|        |                                            
|------- | -------------------------------------------
|ITEM 8. | Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                    |                                                                                                                                                 |      |  |      | 
|----------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ---- |  | ---- | 
|                                    |                                                                                                                                                 | Page | 
|                                    |                                                                                                                                                 |      | 
|Audited Financial Statements:       |                                                                                                                                                 |      |  |     
|                                    | Report of Independent Registered Public Accounting Firm                                                                                         |      |  | F-1  | 
|                                    | Consolidated Balance Sheets as of April 3, 2005 and
    March 28, 2004                                                                          |      |  | F-2  | 
|                                    | Consolidated Statements of Income and Comprehensive Income for
    the Fiscal Years Ended April 3, 2005, March 28, 2004,
    and March 30, 2003 |      |  | F-3  | 
|                                    | Consolidated Statements of Changes in Shareholders Equity
    for the Fiscal Years Ended April 3, 2005, March 28,
    2004, and March 30, 2003 |      |  | F-4  | 
|                                    | Consolidated Statements of Cash Flows for the Fiscal Years Ended
    April 3, 2005, March 28, 2004, and March 30, 2003                          |      |  | F-5  | 
|                                    | Notes to Consolidated Financial Statements                                                                                                      |      |  | F-6  | 
|Supplemental Financial Information: |                                                                                                                                                 |      |  |     
|                                    | Selected Quarterly Financial Information (unaudited)                                                                                            |      |  | F-16 | 

21



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                              
| | -----------------------------
| | /s/ DELOITTE &
    TOUCHE LLP





F-1



---



##### Table of Contents



CROWN CRAFTS, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


April 3, 2005 and March 28, 2004


(Dollar amounts in thousands, except share and per share
amounts)


|                                                                                                                                                                                     |                                            |                                     |         |        |        |   |         |        |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ----------------------------------- | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                                                                                                                                                                     |                                            | 2005                                |         |        | 2004   |  
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  
|ASSETS                                                                                                                                                                              
|Current assets:                                                                                                                                                                      |                                            |                                     |         |        |        |   |         |       
|Cash and cash equivalents                                                                                                                                                            |                                            | $                                   | 955     |        |        | $ | 7       |       
|Accounts receivable (net of allowances of $1,411 in 2005 and
    $2,058 in 2004)                                                                                                     |                                            |                                     |         |        |        |   |         |       
|                                                                                                                                                                                     | Due from factor                            |                                     |         | 13,258 |        |   |         | 16,259 |       
|                                                                                                                                                                                     | Other                                      |                                     |         | 1,110  |        |   |         | 962    |       
|Inventories, net                                                                                                                                                                     |                                            |                                     | 12,544  |        |        |   | 14,394  |       
|Prepaid expenses                                                                                                                                                                     |                                            |                                     | 1,450   |        |        |   | 1,686   |       
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  
|                                                                                                                                                                                     |                                            | Total current assets                |         |        | 29,317 |   |         |        | 33,308 | 
|Property, plant and equipment  at cost:                                                                                                                                             |                                            |                                     |         |        |        |   |         |       
|Land, buildings and improvements                                                                                                                                                     |                                            |                                     | 1,447   |        |        |   | 1,803   |       
|Machinery and equipment                                                                                                                                                              |                                            |                                     | 2,657   |        |        |   | 2,802   |       
|Furniture and fixtures                                                                                                                                                               |                                            |                                     | 661     |        |        |   | 664     |       
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  
|                                                                                                                                                                                     |                                            |                                     | 4,765   |        |        |   | 5,269   |       
|Less accumulated depreciation                                                                                                                                                        |                                            |                                     | 3,179   |        |        |   | 3,435   |       
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  
|                                                                                                                                                                                     |                                            | Property, plant and equipment  net |         |        | 1,586  |   |         |        | 1,834  | 
|Other assets:                                                                                                                                                                        |                                            |                                     |         |        |        |   |         |       
|Goodwill, net                                                                                                                                                                        |                                            |                                     | 22,974  |        |        |   | 22,974  |       
|Other                                                                                                                                                                                |                                            |                                     | 247     |        |        |   | 271     |       
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  
|                                                                                                                                                                                     |                                            | Total other assets                  |         |        | 23,221 |   |         |        | 23,245 | 
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  
|                                                                                                                                                                                     | Total Assets                               |                                     | $       | 54,124 |        |   | $       | 58,387 |       
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                
|Current liabilities:                                                                                                                                                                 |                                            |                                     |         |        |        |   |         |       
|Accounts payable                                                                                                                                                                     |                                            | $                                   | 3,729   |        |        | $ | 5,117   |       
|Accrued wages and benefits                                                                                                                                                           |                                            |                                     | 669     |        |        |   | 1,408   |       
|Accrued royalties                                                                                                                                                                    |                                            |                                     | 1,051   |        |        |   | 1,274   |       
|Other accrued liabilities                                                                                                                                                            |                                            |                                     | 398     |        |        |   | 688     |       
|Current maturities of long-term debt                                                                                                                                                 |                                            |                                     | 2,317   |        |        |   | 3,016   |       
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  
|                                                                                                                                                                                     |                                            | Total current liabilities           |         |        | 8,164  |   |         |        | 11,503 | 
|Non-current liabilities:                                                                                                                                                             |                                            |                                     |         |        |        |   |         |       
|Long-term debt                                                                                                                                                                       |                                            |                                     | 25,085  |        |        |   | 28,447  |       
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  
|                                                                                                                                                                                     |                                            | Total non-current liabilities       |         |        | 25,085 |   |         |        | 28,447 | 
|Commitments and contingencies                                                                                                                                                        |                                            |                                     |        |        |        |   |        |       
|Shareholders equity:                                                                                                                                                                |                                            |                                     |         |        |        |   |         |       
|Common stock  par value $0.01 per share;
    74,000,000 shares authorized; 9,505,937 shares
    outstanding at April 3, 2005 and 9,504,937 shares
    outstanding at March 28, 2004 |                                            |                                     | 95      |        |        |   | 95      |       
|Additional paid-in capital                                                                                                                                                           |                                            |                                     | 38,244  |        |        |   | 38,244  |       
|Accumulated deficit                                                                                                                                                                  |                                            |                                     | (17,464 | )      |        |   | (19,902 | )     
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  
|                                                                                                                                                                                     |                                            | Total shareholders equity          |         |        | 20,875 |   |         |        | 18,437 | 
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  
|                                                                                                                                                                                     | Total Liabilities and Shareholders Equity |                                     | $       | 54,124 |        |   | $       | 58,387 |       
|                                                                                                                                                                                     |                                            |                                     |         |        |        |  



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 3, 2005, March 28, 2004,
and March 30, 2003


|                                              |                                         |                                   |        |        |      |   |        |        |   |   |        |        |  
|--------------------------------------------- | --------------------------------------- | --------------------------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                              |                                         | 2005                              |        |        | 2004 |   |        | 2003   |  
|                                              |                                         |                                   |        |        |      |   |        |        |  
|                                              |                                         | (Amounts in thousands, except per |       
|                                              |                                         | share amounts)                    |       
|Net sales                                     |                                         | $                                 | 83,908 |        |      | $ | 86,227 |        |   | $ | 94,735 |       
|Cost of products sold                         |                                         |                                   | 66,883 |        |      |   | 66,633 |        |   |   | 73,315 |       
|                                              |                                         |                                   |        |        |      |   |        |        |  
|Gross profit                                  |                                         |                                   | 17,025 |        |      |   | 19,594 |        |   |   | 21,420 |       
|Marketing and administrative expenses         |                                         |                                   | 10,788 |        |      |   | 12,160 |        |   |   | 12,686 |       
|Restructuring charge                          |                                         |                                   |       |        |      |   |       |        |   |   | 1,775  |       
|                                              |                                         |                                   |        |        |      |   |        |        |  
|Income from operations                        |                                         |                                   | 6,237  |        |      |   | 7,434  |        |   |   | 6,959  |       
|Other income (expense):                       |                                         |                                   |        |        |      |   |        |        |   |   |        |       
|                                              | Interest expense                        |                                   |        | (3,793 | )    |   |        | (4,055 | ) |   |        | (4,548 | )
|                                              | Other  net                             |                                   |        | 99     |      |   |        | (54    | ) |   |        | 340    |  
|                                              |                                         |                                   |        |        |      |   |        |        |  
|Income before income taxes                    |                                         |                                   | 2,543  |        |      |   | 3,325  |        |   |   | 2,751  |       
|Income tax expense                            |                                         |                                   | 105    |        |      |   | 222    |        |   |   | 264    |       
|                                              |                                         |                                   |        |        |      |   |        |        |  
|Net income                                    |                                         |                                   | 2,438  |        |      |   | 3,103  |        |   |   | 2,487  |       
|                                              |                                         |                                   |        |        |      |   |        |        |  
|Other comprehensive income, net of tax:       |                                         |                                   |        |        |      |   |        |        |   |   |        |       
|                                              | Foreign currency translation adjustment |                                   |        |       |      |   |        | 25     |   |   |        | (35    | )
|                                              |                                         |                                   |        |        |      |   |        |        |  
|Comprehensive income                          |                                         | $                                 | 2,438  |        |      | $ | 3,128  |        |   | $ | 2,452  |       
|                                              |                                         |                                   |        |        |      |   |        |        |  
|Basic income per share                        |                                         | $                                 | 0.26   |        |      | $ | 0.33   |        |   | $ | 0.26   |       
|                                              |                                         |                                   |        |        |      |   |        |        |  
|Diluted income per share                      |                                         | $                                 | 0.11   |        |      | $ | 0.14   |        |   | $ | 0.12   |       
|                                              |                                         |                                   |        |        |      |   |        |        |  
|Weighted average shares outstanding  basic   |                                         |                                   | 9,505  |        |      |   | 9,485  |        |   |   | 9,421  |       
|                                              |                                         |                                   |        |        |      |   |        |        |  
|Weighted average shares outstanding  diluted |                                         |                                   | 21,945 |        |      |   | 22,393 |        |   |   | 21,471 |       
|                                              |                                         |                                   |        |        |      |   |        |        |  



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 3, 2005, March 28, 2004
and March 30, 2003


|                                                   |  |                               |           |  |            |   |         |         |            |             |         |   |             |            |         |               |        |   |     |   |  |   |        |  
|-------------------------------------------------- |  | ----------------------------- | --------- |  | ---------- | - | ------- | ------- | ---------- | ----------- | ------- | - | ----------- | ---------- | ------- | ------------- | ------ | - | --- | - |  | - | ------ | -
|                                                   |  | Common Shares                 |           |  |            |   |         |         | Cumulative |             |         |  
|                                                   |  |                               |           |  | Additional |   |         |         |            | Currency    |         |   | Total       |           
|                                                   |  | Number of                     |           |  |            |   | Paid-In |         |            | Accumulated |         |   | Translation |            |         | Shareholders |       
|                                                   |  | Shares                        |           |  | Amount     |   |         | Capital |            |             | Deficit |   |             | Adjustment |         |               | Equity |  
|                                                   |  |                               |           |  |            |   |         |         |            |             |         |   |             |            |         |               |        |  
|                                                   |  | (Dollar amounts in thousands) |          
|Balances  March 31, 2002                          |  |                               | 9,421,437 |  |            | $ | 9,421   |         |            | $           | 28,857  |   |             | $          | (25,475 | )             |        | $ | 10  |   |  | $ | 12,813 |  
|Net income                                         |  |                               |           |  |            |   |         |         |            |             |         |   |             |            | 2,487   |               |        |   |     |   |  |   | 2,487  |  
|Currency translation adjustment                    |  |                               |           |  |            |   |         |         |            |             |         |   |             |            |         |               |        |   | (35 | ) |  |   | (35    | )
|                                                   |  |                               |           |  |            |   |         |         |            |             |         |   |             |            |         |               |        |  
|Balances  March 30, 2003                          |  |                               | 9,421,437 |  |            |   | 9,421   |         |            |             | 28,857  |   |             |            | (22,988 | )             |        |   | (25 | ) |  |   | 15,265 |  
|Issuance of shares                                 |  |                               | 83,500    |  |            |   | 84      |         |            |             | (23     | ) |             |            |         |               |        |   |     |   |  |   | 61     |  
|Conversion from $1.00 par value to $0.01 par value |  |                               |           |  |            |   | (9,410  | )       |            |             | 9,410   |   |             |            |         |               |        |   |     |   |  |   |       |  
|Net income                                         |  |                               |           |  |            |   |         |         |            |             |         |   |             |            | 3,103   |               |        |   |     |   |  |   | 3,103  |  
|Currency translation adjustment                    |  |                               |           |  |            |   |         |         |            |             |         |   |             |            | (17     | )             |        |   | 25  |   |  |   | 8      |  
|                                                   |  |                               |           |  |            |   |         |         |            |             |         |   |             |            |         |               |        |  
|Balances  March 28, 2004                          |  |                               | 9,504,937 |  |            |   | 95      |         |            |             | 38,244  |   |             |            | (19,902 | )             |        |   |    |   |  |   | 18,437 |  
|Issuance of shares                                 |  |                               | 1,000     |  |            |   |         |         |            |             |         |   |             |            |         |               |        |   |     |   |  |   |       |  
|Net income                                         |  |                               |           |  |            |   |         |         |            |             |         |   |             |            | 2,438   |               |        |   |     |   |  |   | 2,438  |  
|                                                   |  |                               |           |  |            |   |         |         |            |             |         |   |             |            |         |               |        |  
|Balances  April 3, 2005                           |  |                               | 9,505,937 |  |            | $ | 95      |         |            | $           | 38,244  |   |             | $          | (17,464 | )             |        | $ |    |   |  | $ | 20,875 |  
|                                                   |  |                               |           |  |            |   |         |         |            |             |         |   |             |            |         |               |        |  



F-4



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##### Table of Contents



CROWN CRAFTS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


Fiscal Years Ended April 3, 2005, March 28, 2004,
and March 30, 2003


|                                                                                      |                                                       |                             |         |     |        |   |         |      |        |   |         |       |        |  
|------------------------------------------------------------------------------------- | ----------------------------------------------------- | --------------------------- | ------- | --- | ------ | - | ------- | ---- | ------ | - | ------- | ----- | ------ | -
|                                                                                      |                                                       | 2005                        |         |     | 2004   |   |         | 2003 |       
|                                                                                      |                                                       |                             |         |     |        |   |         |      |       
|                                                                                      |                                                       | (Amounts in thousands)      |        
|Operating activities:                                                                 |                                                       |                             |         |     |        |   |         |      |        |   |         |      
|Net income                                                                            |                                                       | $                           | 2,438   |     |        | $ | 3,103   |      |        | $ | 2,487   |      
|Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                       |                             |         |     |        |   |         |      |        |   |         |      
|                                                                                      | Depreciation of property, plant and equipment         |                             |         | 457 |        |   |         | 532  |        |   |         | 724   |       
|                                                                                      | Loss (gain) on sale of property, plant, and equipment |                             |         | 6   |        |   |         | (2   | )      |   |         | 11    |       
|                                                                                      | Discount accretion                                    |                             |         | 681 |        |   |         | 605  |        |   |         | 537   |       
|                                                                                      | Restructuring charge                                  |                             |         |    |        |   |         |     |        |   |         | 1,775 |       
|                                                                                      | Changes in assets and liabilities                     |                             |         |     |        |   |         |      |        |   |         |       |       
|                                                                                      |                                                       | Accounts receivable         |         |     | 2,853  |   |         |      | (1,445 | ) |         |       | (3,244 | )
|                                                                                      |                                                       | Inventories, net            |         |     | 1,850  |   |         |      | 1,154  |   |         |       | 300    |  
|                                                                                      |                                                       | Income tax receivable       |         |     |       |   |         |      |       |   |         |       | 1,820  |  
|                                                                                      |                                                       | Other current assets        |         |     | 236    |   |         |      | (601   | ) |         |       | 1,352  |  
|                                                                                      |                                                       | Other assets                |         |     | 24     |   |         |      | (159   | ) |         |       | 96     |  
|                                                                                      |                                                       | Accounts payable            |         |     | (1,388 | ) |         |      | 593    |   |         |       | 829    |  
|                                                                                      |                                                       | Accrued liabilities         |         |     | (984   | ) |         |      | (575   | ) |         |       | 187    |  
|                                                                                      |                                                       | Other long term liabilities |         |     |       |   |         |      |       |   |         |       | (35    | )
|                                                                                      |                                                       |                             |         |     |        |   |         |      |       
|Net cash provided by operating activities                                             |                                                       |                             | 6,173   |     |        |   | 3,205   |      |        |   | 6,839   |      
|                                                                                      |                                                       |                             |         |     |        |   |         |      |       
|Investing activities:                                                                 |                                                       |                             |         |     |        |   |         |      |        |   |         |      
|Capital expenditures                                                                  |                                                       |                             | (225    | )   |        |   | (422    | )    |        |   | (397    | )    
|Proceeds from disposition of assets                                                   |                                                       |                             | 10      |     |        |   | 282     |      |        |   | 73      |      
|Other                                                                                 |                                                       |                             |        |     |        |   | 6       |      |        |   | (35     | )    
|                                                                                      |                                                       |                             |         |     |        |   |         |      |       
|Net cash used in investing activities                                                 |                                                       |                             | (215    | )   |        |   | (134    | )    |        |   | (359    | )    
|                                                                                      |                                                       |                             |         |     |        |   |         |      |       
|Financing activities:                                                                 |                                                       |                             |         |     |        |   |         |      |        |   |         |      
|Payment of long-term borrowing                                                        |                                                       |                             | (34,124 | )   |        |   | (38,595 | )    |        |   | (41,835 | )    
|Long-term borrowing                                                                   |                                                       |                             | 29,114  |     |        |   | 35,276  |      |        |   | 35,161  |      
|Issuance of common stock                                                              |                                                       |                             |        |     |        |   | 61      |      |        |   | 0       |      
|                                                                                      |                                                       |                             |         |     |        |   |         |      |       
|Net cash used in financing activities                                                 |                                                       |                             | (5,010  | )   |        |   | (3,258  | )    |        |   | (6,674  | )    
|                                                                                      |                                                       |                             |         |     |        |   |         |      |       
|Net increase (decrease) in cash and cash equivalents                                  |                                                       |                             | 948     |     |        |   | (187    | )    |        |   | (194    | )    
|Cash and cash equivalents at beginning of year                                        |                                                       |                             | 7       |     |        |   | 194     |      |        |   | 388     |      
|                                                                                      |                                                       |                             |         |     |        |   |         |      |       
|Cash and cash equivalents at end of year                                              |                                                       | $                           | 955     |     |        | $ | 7       |      |        | $ | 194     |      
|                                                                                      |                                                       |                             |         |     |        |   |         |      |       
|Supplemental cash flow information:                                                   |                                                       |                             |         |     |        |   |         |      |        |   |         |      
|Income taxes paid (refunded)                                                          |                                                       | $                           | 64      |     |        | $ | 276     |      |        | $ | (1,635  | )    
|Interest paid                                                                         |                                                       |                             | 3,102   |     |        |   | 3,267   |      |        |   | 3,597   |      
|Supplemental disclosure of non-cash investing and financing
    activities            |                                                       |                             |         |     |        |   |         |      |        |   |         |      
|                                                                                      | Accrued interest converted to long-term debt          |                             |         | 268 |        |   |         | 268  |        |   |         | 274   |       



F-5



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##### Table of Contents



CROWN CRAFTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Fiscal Years Ended April 3, 2005, March 28, 2004
and March 30, 2003




|         |                        
|-------- | -----------------------
|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:


Inventory Valuation:


Royalty Payments:


Depreciation and Amortization:


Impairment of Long-lived Assets, Identifiable Intangibles and
Goodwill:


F-6



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##### Table of Contents



CROWN CRAFTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Foreign Currency Translation:


Provisions for Income Taxes:


Stock-Based Compensation: Accounting for Stock Issued to
Employees Accounting for Stock Based-Compensation Accounting for Stock-Based
Compensation  Transition and Disclosure


F-7



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##### Table of Contents



CROWN CRAFTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                    |                       |                               |       |      |      |   |       |      |  |   |       |      | 
|------------------------------------------------------------------------------------------------------------------- | --------------------- | ----------------------------- | ----- | ---- | ---- | - | ----- | ---- |  | - | ----- | ---- | 
|                                                                                                                    |                       | 2005                          |       |      | 2004 |   |       | 2003 | 
|                                                                                                                    |                       |                               |       |      |      |   |       |      | 
|                                                                                                                    |                       | (Amounts in thousands, except |      
|                                                                                                                    |                       | per share data)               |      
|Net income, as reported                                                                                             |                       | $                             | 2,438 |      |      | $ | 3,103 |      |  | $ | 2,487 |     
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards |                       |                               | 28    |      |      |   | 35    |      |  |   | 25    |     
|                                                                                                                    |                       |                               |       |      |      |   |       |      | 
|Pro forma net income                                                                                                |                       | $                             | 2,410 |      |      | $ | 3,068 |      |  | $ | 2,462 |     
|                                                                                                                    |                       |                               |       |      |      |   |       |      | 
|Earnings per share:                                                                                                 |                       |                               |       |      |      |   |       |      |  |   |       |     
|                                                                                                                    | Basic  as reported   |                               | $     | 0.26 |      |   | $     | 0.33 |  |   | $     | 0.26 | 
|                                                                                                                    |                       |                               |       |      |      |   |       |      | 
|                                                                                                                    | Basic  pro forma     |                               | $     | 0.25 |      |   | $     | 0.33 |  |   | $     | 0.26 | 
|                                                                                                                    |                       |                               |       |      |      |   |       |      | 
|                                                                                                                    | Diluted  as reported |                               | $     | 0.11 |      |   | $     | 0.14 |  |   | $     | 0.12 | 
|                                                                                                                    |                       |                               |       |      |      |   |       |      | 
|                                                                                                                    | Diluted  pro forma   |                               | $     | 0.11 |      |   | $     | 0.14 |  |   | $     | 0.11 | 
|                                                                                                                    |                       |                               |       |      |      |   |       |      | 

|                        |  |                       |     |  |      |  |     |      |  |  |     | 
|----------------------- |  | --------------------- | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                        |  | 2005                  |     |  | 2004 |  |     | 2003 | 
|                        |  |                       |     |  |      |  |     |      | 
|                        |  | (In percentages,      |    
|                        |  | except expected life) |    
|Dividend Yield          |  |                       |    |  |      |  |    |      |  |  |    | 
|Expected Volatility     |  |                       | 10  |  |      |  | 10  |      |  |  | 20  | 
|Risk free interest rate |  |                       | 4.3 |  |      |  | 4.5 |      |  |  | 4.2 | 
|Expected life, years    |  |                       | 5.0 |  |      |  | 7.9 |      |  |  | 8.0 | 

Segments and Related Information: Disclosures about Segments of an Enterprise and Related
Information.


Net Income Per Share: Earnings per Share


F-8



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##### Table of Contents



CROWN CRAFTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                              |                                                              |                                   |   |        |      |  |   |        |  |  |   |        | 
|----------------------------- | ------------------------------------------------------------ | --------------------------------- | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                              |                                                              | 2005                              |   |        | 2004 |  |   | 2003   | 
|                              |                                                              |                                   |   |        |      |  |   |        | 
|                              |                                                              | (Amounts in thousands, except per |  
|                              |                                                              | share data)                       |  
|Basic Net Income per Share:   |                                                              |                                   |   |        |      |  |   |        |  |  |   |       
|                              | Net Income                                                   |                                   | $ | 2,438  |      |  | $ | 3,103  |  |  | $ | 2,487  | 
|                              |                                                              |                                   |   |        |      |  |   |        | 
|                              | Weighted Average Number of Shares Outstanding                |                                   |   | 9,505  |      |  |   | 9,485  |  |  |   | 9,421  | 
|                              |                                                              |                                   |   |        |      |  |   |        | 
|                              | Basic Net Income per Share                                   |                                   | $ | 0.26   |      |  | $ | 0.33   |  |  | $ | 0.26   | 
|                              |                                                              |                                   |   |        |      |  |   |        | 
|Diluted Net Income per Share: |                                                              |                                   |   |        |      |  |   |        |  |  |   |       
|                              | Net Income                                                   |                                   | $ | 2,438  |      |  | $ | 3,103  |  |  | $ | 2,487  | 
|                              |                                                              |                                   |   |        |      |  |   |        | 
|                              | Weighted Average Number of Shares Outstanding                |                                   |   | 9,505  |      |  |   | 9,485  |  |  |   | 9,421  | 
|                              | Effect of Dilutive Securities, Principally Warrants (Note 5) |                                   |   | 12,440 |      |  |   | 12,908 |  |  |   | 12,050 | 
|                              |                                                              |                                   |   |        |      |  |   |        | 
|                              | Average Shares  Diluted                                     |                                   |   | 21,945 |      |  |   | 22,393 |  |  |   | 21,471 | 
|                              |                                                              |                                   |   |        |      |  |   |        | 
|                              | Diluted Net Income per Share                                 |                                   | $ | 0.11   |      |  | $ | 0.14   |  |  | $ | 0.12   | 
|                              |                                                              |                                   |   |        |      |  |   |        | 

Derivative Instruments and Hedging Activities: Accounting for
Derivative Instruments and Hedging Activities


Recently Issued Accounting Standards: Accounting for Costs Associated
with Exit or Disposal Activities


Share-Based Payment, an Amendment of FASB Statements
No. 123 and 95


Reclassifications:




|         |                     
|-------- | --------------------
|Note 3  | Restructuring Charge



F-9



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##### Table of Contents



CROWN CRAFTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Note 4  Inventories




|                |  |          |        |  |           |   |        | 
|--------------- |  | -------- | ------ |  | --------- | - | ------ | 
|                |  | April 3, |        |  | March 28, |  
|                |  | 2005     |        |  | 2004      |  
|                |  |          |        |  |           |  
|Raw Materials   |  | $        | 633    |  |           | $ | 1,116  | 
|Work in Process |  |          | 210    |  |           |   | 1,028  | 
|Finished Goods  |  |          | 11,701 |  |           |   | 12,250 | 
|                |  |          |        |  |           |  
|                |  | $        | 12,544 |  |           | $ | 14,394 | 
|                |  |          |        |  |           |  



Note 5  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 3, |        |   | March 28, |  
|                                           |  | 2005     |        |   | 2004      |  
|                                           |  |          |        |   |           |  
|Senior notes and senior subordinated notes |  | $        | 20,538 |   |           | $ | 24,054 |  
|Floating rate revolving credit facilities  |  |          |       |   |           |   | 1,495  |  
|Non-interest bearing notes                 |  |          | 8,809  |   |           |   | 8,541  |  
|Original issue discount                    |  |          | (1,945 | ) |           |   | (2,627 | )
|                                           |  |          |        |   |           |  
|                                           |  |          | 27,402 |   |           |   | 31,463 |  
|Less current maturities                    |  |          | 2,317  |   |           |   | 3,016  |  
|                                           |  |          |        |   |           |  
|                                           |  | $        | 25,085 |   |           | $ | 28,447 |  
|                                           |  |          |        |   |           |  





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Revolving Creditof up to $19 million, including a
    $3 million sub-limit for letters of credit. The interest
    rate is prime plus 1.00% (6.75% at April 3, 2005) for base
    rate borrowings and LIBOR plus 2.75% (5.62% at April 3,
    2005) for Euro-dollar borrowings. The maturity date is
    June 30, 2005 (see discussion below regarding amendment
    subsequent to year end). The facility is secured by a first lien
    on all assets. There was no balance at April 3, 2005. The
    Company had $14.9 million available at April 3, 2005.
    As of April 3, 2005, letters of credit of $1.3 million
    were outstanding against the $3 million sub-limit for
    letters of credit associated with the $19 million revolving
    credit facility.                                                                                                                                                                                                                        
|
| | Senior Notesof $4.5 million with a fixed interest
    rate of 10% plus additional interest contingent upon cash flow
    availability of 3%. The maturity date is June 30, 2006, and
    the notes are secured by a first lien on all assets. Minimum
    principal payments of $500,000 are due at the end of each
    calendar quarter. In the event that required debt service
    exceeds 85% of free cash flow (EBITDA (as hereinafter defined)
    less capital expenditures and cash taxes paid), the excess of
    contingent interest and principal amortization over 85% will be
    deferred until maturity of the Senior Notes in June 2006.
    Contingent interest plus additional principal payments will be
    due annually up to 85% of free cash flow. On September 30,
    2002, September 30, 2003 and September 30, 2004, the
    Company made payments to the lenders of $1.6 million,
    $1.3 million and $1.3 million, respectively, related
    to excess cash flow.
|
| | Senior Subordinated Notesof $16 million with a
    fixed interest rate of 10% plus an additional 1.65% payable by
    delivery of a promissory note due July 23, 2007 (PIK
    Notes). The maturity date is July 23, 2007, and the
    notes are secured by a second lien on all assets. In addition to
    principal and interest, a payment of $8 million is due on
    the earliest to occur of (i) maturity of the notes,
    (ii) prepayment of the notes, or (iii) sale of the
    Company. The original issue discount of $4.1 million on
    this non-interest bearing obligation at a market interest rate
    of 12% is being amortized over the life of the notes. The
    remaining balance of $1.9 million is included in the
    Consolidated Balance Sheet as of April 3, 2005.                                                                                                                                                                                               





F-11



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##### Table of Contents



CROWN CRAFTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|       |  |              |       |  |           |   |        |           |  |   |       |  |  |       |    |  |  |   |        | 
|------ |  | ------------ | ----- |  | --------- | - | ------ | --------- |  | - | ----- |  |  | ----- | -- |  |  | - | ------ | 
|Fiscal |  | Senior Notes |       |  | Sub Notes |   |        | PIK Notes |  |   | Other |  |  | Total |   
|       |  |              |       |  |           |   |        |           |  |   |       |  |  |       |   
|2006   |  | $            | 2,300 |  |           | $ |       |           |  | $ |      |  |  | $     | 17 |  |  | $ | 2,317  | 
|2007   |  |              | 2,200 |  |           |   |       |           |  |   |      |  |  |       | 19 |  |  |   | 2,219  | 
|2008   |  |              |      |  |           |   | 24,000 | *         |  |   | 809   |  |  |       | 2  |  |  |   | 24,811 | 
|       |  |              |       |  |           |   |        |           |  |   |       |  |  |       |   
|Total  |  | $            | 4,500 |  |           | $ | 24,000 |           |  | $ | 809   |  |  | $     | 38 |  |  | $ | 29,347 | 
|       |  |              |       |  |           |   |        |           |  |   |       |  |  |       |   






|  |                                                                                                        
|- | -------------------------------------------------------------------------------------------------------
|* | Includes $8 million non-interest bearing note issued at an
    original issue discount of $4.1 million.



Note 6  Income Taxes




|               |                 |                |     |     |      |   |     |      |   |   |     |     |  
|-------------- | --------------- | -------------- | --- | --- | ---- | - | --- | ---- | - | - | --- | --- | -
|               |                 | 2005           |     |     | 2004 |   |     | 2003 |  
|               |                 |                |     |     |      |   |     |      |  
|               |                 | (In thousands) |    
|Current:       |                 |                |     |     |      |   |     |      |   |   |     |    
|               | Federal         |                | $   | 42  |      |   | $   | 24   |   |   | $   | 127 |  
|               | State and local |                |     | 85  |      |   |     | 296  |   |   |     | 161 |  
|               |                 |                |     |     |      |   |     |      |  
|Total current  |                 |                | 127 |     |      |   | 320 |      |   |   | 288 |    
|               |                 |                |     |     |      |   |     |      |  
|Deferred:      |                 |                |     |     |      |   |     |      |   |   |     |    
|               | Federal         |                |     | (22 | )    |   |     | (98  | ) |   |     | (24 | )
|               | State and local |                |     |    |      |   |     |     |   |   |     |    |  
|               |                 |                |     |     |      |   |     |      |  
|Total deferred |                 |                | (22 | )   |      |   | (98 | )    |   |   | (24 | )  
|               |                 |                |     |     |      |   |     |      |  
|Total expense  |                 | $              | 105 |     |      | $ | 222 |      |   | $ | 264 |    
|               |                 |                |     |     |      |   |     |      |  

F-12



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##### Table of Contents



CROWN CRAFTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                            |                                            |                |        |       |      |   |        |       | 
|------------------------------------------- | ------------------------------------------ | -------------- | ------ | ----- | ---- | - | ------ | ----- | 
|                                            |                                            | 2005           |        |       | 2004 |  
|                                            |                                            |                |        |       |      |  
|                                            |                                            | (In thousands) |       
|Gross deferred income tax liabilities:      |                                            |                |        |       |      |   |        |      
|                                            | Property, plant and equipment              |                | $      | 75    |      |   | $      | 5     | 
|                                            |                                            |                |        |       |      |  
|Total gross deferred income tax liabilities |                                            |                | 75     |       |      |   | 5      |      
|                                            |                                            |                |        |       |      |  
|Gross deferred income tax assets:           |                                            |                |        |       |      |   |        |      
|                                            | Employee benefit accruals                  |                |        | 226   |      |   |        | 448   | 
|                                            | Accounts receivable and inventory reserves |                |        | 783   |      |   |        | 1,165 | 
|                                            | Net operating loss carryforward            |                |        | 4,909 |      |   |        | 5,535 | 
|                                            | Other                                      |                |        | 250   |      |   |        | 4     | 
|                                            |                                            |                |        |       |      |  
|Total gross deferred income tax assets      |                                            |                | 6,168  |       |      |   | 7,152  |      
|                                            |                                            |                |        |       |      |  
|Deferred tax asset valuation allowance      |                                            |                | (5,973 | )     |      |   | (7,049 | )    
|                                            |                                            |                |        |       |      |  
|Net deferred income tax asset               |                                            | $              | 120    |       |      | $ | 98     |      
|                                            |                                            |                |        |       |      |  





|                                                      |  |                |        |   |      |   |       |      |  |   |        |  
|----------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                                      |  | 2005           |        |   | 2004 |   |       | 2003 | 
|                                                      |  |                |        |   |      |   |       |      | 
|                                                      |  | (In thousands) |       
|Tax expense at statutory rate                         |  | $              | 865    |   |      | $ | 1,131 |      |  | $ | 936    |  
|State income taxes, net of Federal income tax benefit |  |                | 67     |   |      |   | 200   |      |  |   | 106    |  
|Valuation allowance                                   |  |                | (1,076 | ) |      |   | (377  | )    |  |   | (1,776 | )
|Disposition of subsidiary                             |  |                |       |   |      |   | (836  | )    |  |   |       |  
|Foreign subsidiary losses                             |  |                |       |   |      |   | 29    |      |  |   | 797    |  
|Other                                                 |  |                | 249    |   |      |   | 75    |      |  |   | 201    |  
|                                                      |  |                |        |   |      |   |       |      | 
|Income tax expense                                    |  | $              | 105    |   |      | $ | 222   |      |  | $ | 264    |  
|                                                      |  |                |        |   |      |   |       |      | 

Note 7  Retirement Plans




Note 8  Stock Options


Accounting for Stock Issued to Employees


F-13



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##### Table of Contents



CROWN CRAFTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Accounting for Stock Based
Compensation








|                                   |  |           |          |   |                |          |           |                |  |   |      | 
|---------------------------------- |  | --------- | -------- | - | -------------- | -------- | --------- | -------------- |  | - | ---- | 
|                                   |  |           |          |   |                | Weighted |          
|                                   |  | Number of |          |   | Exercise Price |          |           | Average        | 
|                                   |  | Shares    |          |   | per Share      |          |           | Exercise Price | 
|                                   |  |           |          |   |                |          |           |                | 
|Options outstanding March 31, 2002 |  |           | 258,100  |   |                | $        | 0.18-17.5 |                |  | $ | 3.42 | 
|Options granted                    |  |           | 328,000  |   |                |          | 0.71      |                |  |   | 0.71 | 
|Options canceled                   |  |           | (61,550  | ) |                |          | 0.18-17.5 |                |  |   | 7.18 | 
|                                   |  |           |          |   |                |          |           |                | 
|Options outstanding March 30, 2003 |  |           | 524,550  |   |                |          | 0.18-8.06 |                |  |   | 1.28 | 
|Options granted                    |  |           | 174,750  |   |                |          | 0.65      |                |  |   | 0.65 | 
|Options exercised                  |  |           | (2,500   | ) |                |          | 0.18      |                |  |   | 0.18 | 
|Options canceled                   |  |           | (118,900 | ) |                |          | 0.18-8.06 |                |  |   | 2.73 | 
|                                   |  |           |          |   |                |          |           |                | 
|Options outstanding March 28, 2004 |  |           | 577,900  |   |                |          | 0.18-2.31 |                |  |   | 0.95 | 
|Options granted                    |  |           | 14,000   |   |                |          | 0.65      |                |  |   | 0.65 | 
|Options exercised                  |  |           | (1,000   | ) |                |          | 0.18      |                |  |   | 0.18 | 
|Options canceled                   |  |           | (56,550  | ) |                |          | 0.65-2.31 |                |  |   | 0.87 | 
|                                   |  |           |          |   |                |          |           |                | 
|Options outstanding April 3, 2005  |  |           | 534,350  |   |                | $        | 0.18-2.31 |                |  | $ | 0.81 | 
|                                   |  |           |          |   |                |          |           |                | 



|                         |  |             |         |          |             |  |               |             |  |   |             |               |  |             |         |  |  |   |      | 
|------------------------ |  | ----------- | ------- | -------- | ----------- |  | ------------- | ----------- |  | - | ----------- | ------------- |  | ----------- | ------- |  |  | - | ---- | 
|                         |  |             |         | Weighted |             |  | Weighted      |             |  |   |             | Weighted      | 
|                         |  |             |         | Avg.     |             |  | Avg. Exercise |             |  |   |             | Avg. Exercise | 
|                         |  | Number of   |         |          | Remaining   |  |               | Price of    |  |   | Number of   |               |  | Price of    |        
|                         |  | Options     |         |          | Contractual |  |               | Options     |  |   | Shares      |               |  | Shares      |        
|Range of Exercise Prices |  | Outstanding |         |          | Life        |  |               | Outstanding |  |   | Exercisable |               |  | Exercisable |        
|                         |  |             |         |          |             |  |               |             |  |   |             |               |  |             |        
|$0.18-0.41               |  |             | 46,000  |          |             |  | 4.89 years    |             |  | $ | 0.25        |               |  |             | 46,000  |  |  | $ | 0.25 | 
|$0.65                    |  |             | 166,750 |          |             |  | 7.82 years    |             |  |   | 0.65        |               |  |             | 74,044  |  |  |   | 0.65 | 
|$0.71                    |  |             | 213,500 |          |             |  | 7.07 years    |             |  |   | 0.71        |               |  |             | 208,838 |  |  |   | 0.71 | 
|$1.06-1.19               |  |             | 76,500  |          |             |  | 5.34 years    |             |  |   | 1.12        |               |  |             | 76,500  |  |  |   | 1.12 | 
|$2.31                    |  |             | 31,600  |          |             |  | 4.74 years    |             |  |   | 2.31        |               |  |             | 31,600  |  |  |   | 2.31 | 
|                         |  |             |         |          |             |  |               |             |  |   |             |               |  |             |        
|                         |  |             | 534,350 |          |             |  |               |             |  |   |             |               |  |             | 436,982 |  |  |   |      | 
|                         |  |             |         |          |             |  |               |             |  |   |             |               |  |             |        

F-14



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##### Table of Contents



CROWN CRAFTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Note 9  Major Customers




|                      |  |             |    |   |      |  |    |      |  |  |    |  
|--------------------- |  | ----------- | -- | - | ---- |  | -- | ---- |  |  | -- | -
|                      |  | Fiscal Year |   
|                      |  |             |   
|                      |  | 2005        |    |   | 2004 |  |    | 2003 | 
|                      |  |             |    |   |      |  |    |      | 
|Toys R Us             |  |             | 36 | % |      |  | 36 | %    |  |  | 31 | %
|Wal-Mart Stores, Inc. |  |             | 29 | % |      |  | 27 | %    |  |  | 30 | %
|Target Corporation    |  |             | 12 | % |      |  | 12 | %    |  |  | 10 | %



|          |                              
|--------- | -----------------------------
|Note 10  | Commitments and Contingencies



|                              |  |                        |        |           |        |   |       |             |           |   |             |  |  |         |    |  |  |   |   | 
|----------------------------- |  | ---------------------- | ------ | --------- | ------ | - | ----- | ----------- | --------- | - | ----------- |  |  | ------- | -- |  |  | - | - | 
|                              |  | Payments Due by Period
|                              |  |                       
|                              |  |                        |        | Less Than |        |   |       |             | More Than
|                              |  | Total                  |        |           | 1 Year |   |       | 1 - 3 Years |           |   | 3 - 5 Years |  |  | 5 Years
|                              |  |                        |        |           |        |   |       |             |           |   |             |  |  |        
|                              |  | (In thousands)        
|Contractual Obligations       |  |                        |        |           |        |   |       |             |           |   |             |  |  |         |    |  |  |   |   | 
|Long-Term Debt Obligations    |  | $                      | 29,309 |           |        | $ | 2,300 |             |           | $ | 27,009      |  |  | $       |   |  |  | $ |  | 
|Capital Lease Obligations     |  |                        | 38     |           |        |   | 17    |             |           |   | 21          |  |  |         |   |  |  |   |  | 
|Operating Lease Obligations   |  |                        | 1,721  |           |        |   | 1,130 |             |           |   | 571         |  |  |         | 20 |  |  |   |  | 
|Purchase Obligations          |  |                        | 26     |           |        |   | 21    |             |           |   | 5           |  |  |         |   |  |  |   |  | 
|Minimum Royalty Obligations   |  |                        | 2,878  |           |        |   | 2,878 |             |           |   |            |  |  |         |   |  |  |   |  | 
|                              |  |                        |        |           |        |   |       |             |           |   |             |  |  |         |   
|Total Contractual Obligations |  | $                      | 33,972 |           |        | $ | 6,346 |             |           | $ | 27,606      |  |  | $       | 20 |  |  | $ |  | 
|                              |  |                        |        |           |        |   |       |             |           |   |             |  |  |         |   









F-15



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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   |  |   | Fourth  | 
|                                    |  | Quarter                                |        |   | Quarter |   |        | Quarter |  |   | Quarter | 
|                                    |  |                                        |        |   |         |   |        |         |  |   |         | 
|                                    |  | In thousands, except per share amounts |       
|Fiscal Year ended April 3, 2005     |  |                                        |        |   |         |   |        |         |  |   |         |  |  |   |        | 
|Net sales                           |  | $                                      | 16,908 |   |         | $ | 23,025 |         |  | $ | 20,664  |  |  | $ | 23,311 | 
|Gross profit                        |  |                                        | 3,474  |   |         |   | 4,639  |         |  |   | 4,402   |  |  |   | 4,510  | 
|Net income (loss)                   |  |                                        | (102   | ) |         |   | 844    |         |  |   | 918     |  |  |   | 778    | 
|Basic net income (loss) per share   |  |                                        | (0.01  | ) |         |   | 0.09   |         |  |   | 0.10    |  |  |   | 0.08   | 
|Diluted net income (loss) per share |  |                                        | (0.01  | ) |         |   | 0.04   |         |  |   | 0.04    |  |  |   | 0.04   | 
|Fiscal Year ended March 28, 2004    |  |                                        |        |   |         |   |        |         |  |   |         |  |  |   |        | 
|Net sales                           |  | $                                      | 18,465 |   |         | $ | 22,001 |         |  | $ | 20,717  |  |  | $ | 25,044 | 
|Gross profit                        |  |                                        | 4,161  |   |         |   | 4,872  |         |  |   | 4,489   |  |  |   | 6,072  | 
|Net income (loss)                   |  |                                        | (114   | ) |         |   | 924    |         |  |   | 719     |  |  |   | 1,574  | 
|Basic net income (loss) per share   |  |                                        | (0.01  | ) |         |   | 0.10   |         |  |   | 0.08    |  |  |   | 0.17   | 
|Diluted net income (loss) per share |  |                                        | (0.01  | ) |         |   | 0.04   |         |  |   | 0.03    |  |  |   | 0.07   | 

F-16