##### Table of Contents



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

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended April
    1, 2007ORo

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

58-0678148(I.R.S. Employer
    Identification No.)916 S. Burnside
    Ave.
    Gonzales, Louisiana(Address of
    principal executive offices)

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

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

The NASDAQ Capital MarketCommon Share Purchase Rights

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




---



##### Table of Contents



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




---



##### Table of Contents



Product
    Design and Styling
    Raw
    Materials
      Product
    Sourcing
      Sales and
    Marketing
       3




---



##### Table of Contents



Customers
    Fiscal Year2007


2006


2005Wal-Mart Stores, Inc.


39
%


35
%


29
%Toys R Us


23
%


30
%


36
%Target Corporation


16
%


14
%


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




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



ITEM 2.
    Properties      Approximate


Owned/Location

Use

Square Feet


LeasedGonzales, Louisiana

Administrative and sales office


17,761


LeasedBerea, Kentucky

Offices, manufacturing, warehouse
    and distribution facilities and retail store


54,100


OwnedCompton, California

Offices, warehouse and
    distribution center


157,400


LeasedRogers, Arkansas

Sales office


1,625


Leased     ITEM 3.
    Legal
    Proceedings    ITEM 4.
    Submission
    of Matters to a Vote of Security Holders   7




---



##### Table of Contents



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

High


LowFiscal Year 2007First Quarter

$
0.70


$
0.57Second Quarter


3.54



0.65Third Quarter


4.25



3.07Fourth Quarter


6.05



3.65Fiscal Year 2006First Quarter

$
0.60


$
0.43Second Quarter


0.69



0.45Third Quarter


0.70



0.44Fourth Quarter


0.70



0.55    8




---



##### Table of Contents



Stock
    Performance Graph
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
    Among Crown Crafts, Inc., The S & P 500 Index
    And The S & P Apparel, Accessories & Luxury Goods
    Index
  
  *
    $100 invested on 3/31/02 in stock or index-including
    reinvestment of dividends. Fiscal year ending March 31.
    Copyright©
    2007, Standard & Poors, a division of The McGraw-Hill
    Companies, Inc. All rights reserved.
    www.researchdatagroup.com/S&P.htm  2002


2003


2004


2005


2006


2007Crown Crafts,
    Inc.



100.00




102.22




117.78




115.56




142.22




1066.67S & P 500



100.00




75.24




101.66




108.47




121.19




135.52S & P Apparel,
    Accessories & Luxury Goods



100.00




90.17




114.07




138.80




153.83




201.17  9




---



##### Table of Contents



Equity
    Compensation Plans
    Number ofSecurities to be





Number ofIssued Upon


Weighted-Average


SecuritiesExercise of


Exercise Price of


Remaining AvailableOutstanding


Outstanding


for Future IssuanceOptions, Warrants


Options, Warrants


Under EquityPlan Category

and Rights


and Rights


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


212,000


$
3.15



613,000   ITEM 6.
    Selected
    Financial Data    Fiscal Year2007


2006


2005


2004


2003In thousands, except per share dataFor the yearNet sales

$
71,988


$
72,629


$
83,908


$
86,227


$
94,735Gross profit


18,100



17,088



17,025



19,594



21,420Income from operations


7,874



7,041



6,237



7,434



6,959Net income


7,601



7,967



2,438



3,103



2,487Basic net income per share


0.78



0.84



0.26



0.33



0.26Diluted net income per share


0.76



0.37



0.11



0.14



0.12Cash dividends per share


















At year endTotal assets

$
48,916


$
58,179


$
54,124


$
58,387


$
57,926Long-term debt


5,780



23,922



25,085



28,447



30,895Shareholders equity


36,823



28,842



20,875



18,437



15,265  10




---



##### Table of Contents



ITEM 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Results
    of Operations
    Fiscal Year


2007 Compared to 2006


2006 Compared to 20052007


2006


2005


$ Change


% Change


$ Change


% ChangeDollars in thousandsNet Sales by CategoryBedding, Blankets and Accessories

$
47,869


$
48,686


$
55,792


$
(817
)


(1.7
)%

$
(7,106
)


(12.7
)%Bibs and Bath


21,381



21,141



24,887



240



1.1
%


(3,746
)


(15.1
)%Handwoven Products


2,738



2,802



3,229



(64
)


(2.3
)%


(427
)


(13.2
)%Total Net Sales


71,988



72,629



83,908



(641
)


(0.9
)%


(11,279
)


(13.4
)%Cost of Products Sold


53,888



55,541



66,883



(1,653
)


(3.0
)%


(11,342
)


(17.0
)%Gross Profit


18,100



17,088



17,025



1,012



5.9
%


63



0.4
%% of Net Sales


25.1
%


23.5
%


20.3
%Marketing and Administrative
    Expenses


10,226



10,047



10,788



179



1.8
%


(741
)


(6.9
)%% of Net Sales


14.2
%


13.8
%


12.9
%Interest Expense


1,363



3,046



3,793



(1,683
)


(55.3
)%


(747
)


(19.7
)%Gain on Refinancing


4,069











4,069



100.0
%






0.0
%Other  net


339



4



99



335



8,375.0
%


(95
)


(96.0
)%Income Tax Expense (Benefit)


3,318



(3,968
)


105



7,286



(183.6
)%


(4,073
)


(3,879.0
)%Net Income


7,601



7,967



2,438



(366
)


(4.6
)%


5,529



226.8
%% of Net Sales


10.6
%


11.0
%


2.9
%   Net Sales:
      ®
 11




---



##### Table of Contents



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




---



##### Table of Contents



Gain on Debt Refinancing:
  Other Income  Net:
    Income Tax Benefit:
    Financial
    Position, Liquidity and Capital Resources
   13




---



##### Table of Contents



April 1,


April 2,2007


2006Revolving credit facility

$
2,742


$
Senior subordinated notes






16,000Non-interest bearing notes


4,000



8,000Capital leases


23



58PIK notes






1,077Original issue discount


(966
)


(1,177
)5,799



23,958Less current maturities


19



36$
5,780


$
23,922     Revolving Credit
    Subordinated Notes
   14




---



##### Table of Contents



Fiscal

Revolver


Sub Notes


Other


Total2008

$



$



$
19


$
192009










4



42010


2,742











2,7422011






2,000







2,0002012






2,000







2,000Total

$
2,742


$
4,000


$
23


$
6,765       Payments Due by PeriodLess Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


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

$
6,742


$



$
2,742


$
4,000


$
Interest on Long-Term Debt


76



33



43







Capital Lease Obligations


23



19



4







Operating Lease Obligations


2,906



1,254



1,651



1



Purchase Obligations


539



82



457







Minimum Royalty Obligations


2,578



2,297



281







Total Contractual Obligations

$
12,864


$
3,685


$
5,178


$
4,001


$
     Off-Balance
    Sheet Arrangements
   15




---



##### Table of Contents



Critical
    Accounting Policies
    Revenue Recognition:
  Use of Estimates:
  Allowances Against Accounts Receivable:
  EITF 01-9,
      Royalty Payments:
 16




---



##### Table of Contents



Inventory Valuation: first-in, work-in-process
      Provisions for Income Taxes:
  Valuation of Long-Lived Assets, Identifiable Intangibles and
    Goodwill:
   17




---



##### Table of Contents



Goodwill and Other Intangible
    Assets
  Recently-Issued
    Accounting Standards
  The Fair Value Option for Financial Assets and
    Financial Liabilities
  Fair Value Measurements,
  Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109
  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   18




---



##### Table of Contents



ITEM 9A.
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e) Rule 13a-15 15d-15
  Rules 13a-15 15d-15
  ITEM 9B.
    Other
    Information    PART III
  ITEM 10.
    Directors,
    Executive Officers and Corporate Governance  Regulation S-K Regulation S-K
  ITEM 11.
    Executive
    Compensation    ITEM 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    ITEM 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    ITEM 14.
    Principal
    Accounting Fees and Services   19




---



##### Table of Contents



PART IV
  ITEM 15.  Exhibits
    and Financial Statement Schedules
  (a)(1).
    Financial Statements
      
 
 
   (a)(2).
    Financial Statement Schedule
    Schedule II 
    Valuation and Qualifying Accounts


Page 21    20




---



##### Table of Contents



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

Column B


Column C


Column D


Column ECharged toBalance at


Costs and





Balance atBeginning


(Reversed from)





End ofof Period


Expenses


Deductions(1)


Period(In thousands)Accounts Receivable Valuation
    Accounts:Year Ended April 3,
    2005Allowance for doubtful accounts

$
32


$
4


$
14


$
22Allowance for customer deductions

$
2,026


$
6,792


$
7,429


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

$
22


$
13


$
2


$
33Allowance for customer deductions

$
1,389


$
5,376


$
5,634


$
1,131Year Ended April 1
    2007Allowance for doubtful accounts

$
33


$
28


$
15


$
20Allowance for customer deductions

$
1,131


$
4,199


$
4,037


$
969Inventory Valuation
    Accounts:Year Ended April 3,
    2005Allowance for discontinued and
    irregulars

$
1,003


$
(282
)

$



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

$
721


$
(194
)

$



$
527Year Ended April 1
    2007Allowance for discontinued and
    irregulars

$
527


$
(183
)

$



$
344Restructuring
    Reserve(2):Year ended April 3,
    2005Allowance for restructuring costs

$
30


$



$
30


$
     (1)
    
    Deductions from the allowance for doubtful accounts represent
    the amount of accounts written off reduced by any subsequent
    recoveries.(2)
    
    Reserve relates to the decision to close the Companys
    Mexican manufacturing facility in fiscal year 2003. 21




---



##### Table of Contents



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



Description of Exhibits3
.1



Amended and Restated Certificate
    of Incorporation of the Company(4)3
.2



Bylaws of the Company(4)4
.1



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



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



Amended and Restated Rights
    Agreement dated as of August 6, 2003 between the Company
    and SunTrust Bank, as Rights Agent, including the Form of Right
    Certificate (Exhibit A) and the Summary of Rights to
    Purchase Common Shares (Exhibit B).(3)4
.4



Amendment No. 1 to Amended
    and Restated Rights Agreement dated as of July 12, 2006
    between the Company and Computershare Investor Services, LLC(7)4
.5



Crown Crafts, Inc. 2006 Omnibus
    Incentive Plan.(9)4
.6



Form of Incentive Stock Option
    Agreement.(9)4
.7



Form of Non-Qualified Stock Option
    Agreement (Employees).(9)4
.8



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



Form of Restricted Stock Grant
    Agreement (Form A).(9)4
.10



Form of Restricted Stock Grant
    Agreement (Form B).(9)4
.11



Amendment No. 2 to Amended
    and Restated Rights Agreement dated as of August 30, 2006
    between the Company and Computershare Investor Services, LLC(10)10
.1



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



Amended and Restated Support
    Agreement dated as of August 6, 2003 by and between the
    Company and Wynnefield Capital Management, LLC(2)10
.3



Amended and Restated Severance
    Protection Agreement dated April 20, 2004 by and between
    the Company and E. Randall Chestnut(5)10
.4



Amended and Restated Employment
    Agreement dated April 20, 2004 by and between the Company
    and Amy Vidrine Samson(5)10
.5



Amended and Restated Employment
    Agreement dated April 20, 2004 by and between the Company
    and Nanci Freeman(5)10
.6



Agreement between the Company and
    Wynnefield Capital, Inc. and Frederick G. Wasserman dated
    November 4, 2005(6)10
.7



Financing Agreement dated as of
    July 11, 2006 by and among the Company, Churchill Weavers,
    Inc., Hamco, Inc., Crown Crafts Infant Products, Inc. and The
    CIT Group/Commercial Services, Inc.(7)10
.8



Stock Pledge Agreement dated as of
    July 11, 2006 by and among the Company, Churchill Weavers,
    Inc., Hamco, Inc., Crown Crafts Infant Products, Inc. and The
    CIT Group/Commercial Services, Inc.(7)10
.9



Mortgage, Assignment of Leases and
    Rents, Fixture Filing and Security Agreement dated July 11,
    2006 from Churchill Weavers, Inc. to The CIT Group/Commercial
    Services, Inc.(7)10
.10



Secured Subordinated Promissory
    Note dated July 11, 2006 issued by the Company to Wachovia
    Bank, National Association(7)10
.11



Secured Subordinated Promissory
    Note dated July 11, 2006 issued by the Company to Banc of
    America Strategic Solutions, Inc.(7)10
.12



Secured Subordinated Promissory
    Note dated July 11, 2006 issued by the Company to The
    Prudential Insurance Company of America(7)10
.13



Security Agreement dated as of
    July 11, 2006 by and among the Company, Churchill Weavers,
    Inc., Hamco, Inc., Crown Crafts Infant Products, Inc. and
    Wachovia Bank, National Association, as Agent(7)10
.14



Mortgage, Assignment of Leases and
    Rents, Fixture Filing and Security Agreement dated July 11,
    2006 from Churchill Weavers, Inc. to Wachovia Bank, National
    Association, as Agent(7) 22




---



##### Table of Contents



ExhibitNumber



Description of Exhibits10
.15



Support Agreement dated as of
    August 17, 2006 between the Company and Barron Capital
    Advisors, LLC(8)14
.1



Code of Ethics(5)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 Current
    Report on
    Form 8-K
    dated July 23, 2001.(2)
    
    Incorporated herein by reference to Registrants Quarterly
    Report on
    Form 10-Q
    for the quarter ended June 29, 2003.(3)
    
    Incorporated herein by reference to Registrants
    Registration Statement on
    Form 8-A/A
    dated August 13, 2003.(4)
    
    Incorporated herein by reference to Registrants Quarterly
    Report on
    Form 10-Q
    for the quarter ended December 28, 2003.(5)
    
    Incorporated herein by reference to Registrants Annual
    Report on
    Form 10-K
    for the fiscal year ended March 28, 2004.(6)
    
    Incorporated herein by reference to Registrants Current
    Report on Form
    8-K dated
    November 4, 2005.(7)
    
    Incorporated herein by reference to Registrants Current
    Report on Form
    8-K dated
    July 17, 2006.(8)
    
    Incorporated herein by reference to Registrants Current
    Report on Form
    8-K dated
    August 17, 2006.(9)
    
    Incorporated herein by reference to Registrants
    Registration Statement on
    Form S-8
    dated August 24, 2006.(10)
    
    Incorporated herein by reference to Registrants Current
    Report on Form
    8-K dated
    August 30, 2006.(11)
    
    Filed herewith. 23




---



##### Table of Contents



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

Title

Date/s/  E.
    Randall ChestnutE.
    Randall Chestnut

Chief Executive Officer,
    Director

June 12, 2007/s/  William
    T. Deyo, Jr.William
    T. Deyo, Jr.

Director

June 12, 2007/s/  Steven
    E. FoxSteven
    E. Fox

Director

June 12, 2007/s/  Sidney
    KirschnerSidney
    Kirschner

Director

June 12, 2007/s/  Zenon
    S. NieZenon
    S. Nie

Director

June 12, 2007/s/  Donald
    RatajczakDonald
    Ratajczak

Director

June 12, 2007/s/  James
    A. VerbruggeJames
    A. Verbrugge

Director

June 12, 2007/s/  Amy
    Vidrine SamsonAmy
    Vidrine Samson

Chief Financial Officer, 
    Chief Accounting Officer

June 12, 2007  24




---



##### 



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


F-1Consolidated
    Balance Sheets as of April 1, 2007 and April 2,
    2006


F-2Consolidated
    Statements of Income for the Fiscal Years Ended April 1,
    2007, April 2, 2006, and April 3, 2005


F-3Consolidated
    Statements of Changes in Shareholders Equity for the
    Fiscal Years Ended April 1, 2007, April 2, 2006, and
    April 3, 2005


F-4Consolidated
    Statements of Cash Flows for the Fiscal Years Ended
    April 1, 2007, April 2, 2006, and April 3,
    2005


F-5Notes to
    Consolidated Financial Statements


F-6Subsidiaries of the CompanyConsent of Independent Registered Public Accounting FirmRule 13a-14(a) /15d-14(a) Certification by the CEORule 13a-14(a) /15d-14(a) Certification by the CFOSection 1350 Certification by the CEOSection 1350 Certification by the CFO   25




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Share-Based Payment.
      F-1




---



##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
 April 1,
    2007 and April 2, 2006
  April 1, 2007


April 2, 2006(Amounts in thousands, except share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
33


$
3,790Accounts receivable (net of
    allowances of $989 at April 1, 2007 and $1,164 at
    April 2, 2006)Due from factor


11,764



12,465Other


1,121



1,992Inventories, net


7,145



9,742Prepaid expenses


1,313



1,177Deferred income taxes


2,408



990Total current assets


23,784



30,156Property, plant and
    equipment  at cost:Land, buildings and improvements


1,322



1,375Machinery and equipment


2,502



2,459Furniture and fixtures


654



6494,478



4,483Less accumulated depreciation


3,037



2,945Property, plant and
    equipment  net


1,441



1,538Other assets:Goodwill, net


22,884



22,974Deferred income taxes






3,397Other


807



114Total other assets


23,691



26,485Total Assets

$
48,916


$
58,179LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
3,552


$
3,511Accrued wages and benefits


1,300



942Accrued royalties


671



559Other accrued liabilities


73



367Current maturities of long-term
    debt


19



36Total current
    liabilities


5,615



5,415Non-current
    liabilities:Long-term debt


5,780



23,922Deferred income taxes


698



Total non-current
    liabilities


6,478



23,922Commitments and
    contingencies






Shareholders
    equity:Common stock  par value
    $0.01 per share; 74,000,000 shares authorized;
    10,003,692 shares outstanding at April 1, 2007 and
    9,505,937 outstanding at April 2, 2006


100



95Additional paid-in capital


38,619



38,244Accumulated deficit


(1,896
)


(9,497
)Total shareholders
    equity


36,823



28,842Total Liabilities and
    Shareholders Equity

$
48,916


$
58,179    F-2




---



##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF INCOME
 Fiscal
    years ended April 1, 2007, April 2, 2006, and
    April 3, 2005
  2007


2006


2005(Amounts in thousands,except per share amounts)Net sales

$
71,988


$
72,629


$
83,908Cost of products sold


53,888



55,541



66,883Gross profit


18,100



17,088



17,025Marketing and administrative
    expenses


10,226



10,047



10,788Income from operations


7,874



7,041



6,237Other income (expense):Interest expense


(1,363
)


(3,046
)


(3,793
)Gain on refinancing


4,069







Other  net


339



4



99Income before income taxes


10,919



3,999



2,543Income tax expense (benefit)


3,318



(3,968
)


105Net income

$
7,601


$
7,967


$
2,438Basic earnings per share

$
0.78


$
0.84


$
0.26Diluted earnings per share

$
0.76


$
0.37


$
0.11Weighted average shares
    outstanding  basic


9,782



9,506



9,505Weighted average shares
    outstanding  diluted


10,038



21,728



21,945    F-3




---



##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 Fiscal
    years ended April 1, 2007, April 2, 2006 and
    April 3, 2005
  Common Shares


Additional





TotalNumber of





Paid-in


Accumulated


ShareholdersShares


Amount


Capital


Deficit


Equity(Dollar amounts in thousands)Balances 
    March 28, 2004


9,504,937


$
95


$
38,244


$
(19,902
)

$
18,437Issuance of shares


1,000















Net income














2,438



2,438Balances 
    April 3, 2005


9,505,937



95



38,244



(17,464
)


20,875Net income














7,967



7,967Balances 
    April 2, 2006


9,505,937



95



38,244



(9,497
)


28,842Issuance of Shares


497,755



5



75







80Stock-based Compensation










300







300Net income














7,601



7,601Balances 
    April 1, 2007


10,003,692


$
100


$
38,619


$
(1,896
)

$
36,823    F-4




---



##### Table of Contents



CROWN
    CRAFTS, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 Fiscal
    years ended April 1, 2007, April 2, 2006, and
    April 3, 2005
  2007


2006


2005(Amounts in thousands)Operating activities:Net income

$
7,601


$
7,967


$
2,438Adjustments to reconcile net
    income to net cash provided by operating activities:Depreciation of property, plant
    and equipment


452



479



457Goodwill write-off


90







Amortization of intangibles


17



6



8Deferred income taxes


2,677



(4,267
)


(Gain) loss on sale of property,
    plant and equipment


(136
)


19



6Discount accretion


349



768



681Gain on debt refinancing


(4,069
)






Stock-based compensation


300







Changes in assets and liabilitiesAccounts receivable


1,572



(90
)


2,853Inventories, net


2,597



2,802



1,850Prepaid expenses


(136
)


273



236Other assets


(110
)


6



16Accounts payable


41



(217
)


(1,388
)Accrued liabilities


176



18



(984
)Net cash provided by operating
    activities


11,421



7,764



6,173Investing activities:Capital expenditures


(381
)


(450
)


(225
)Payment to acquire Kimberly Grant
    brand


(600
)






Proceeds from disposition of assets


162



1



10Net cash used in investing
    activities


(819
)


(449
)


(215
)Financing activities:Retirement of debt


(17,077
)


(4,500
)


Borrowings (repayments) on
    long-term debt


(36
)


20



(3,515
)Borrowings (repayments) under line
    of credit, net


2,744







(1,495
)Debt issuance costs


(70
)






Issuance of common stock


80







Net cash used in financing
    activities


(14,359
)


(4,480
)


(5,010
)Net (decrease) increase in cash
    and cash equivalents


(3,757
)


2,835



948Cash and cash equivalents at
    beginning of period


3,790



955



7Cash and cash equivalents at
    end of period

$
33


$
3,790


$
955Supplemental cash flow
    information:Income taxes paid (received)

$
738


$
(75
)

$
64Interest paid


1,121



2,078



3,102Accrued interest converted to
    long-term debt






268



268    F-5




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes
    to Consolidated Financial Statements
 Fiscal Years Ended April 1, 2007, April 2, 2006
    and April 3, 2005
  Note 1 
    Description
    of Business    Note 2 
    Summary
    of Significant Accounting Policies  Basis of Presentation:
    Cash and Cash Equivalents:
  Use of Estimates:
  Financial Instruments:
  
    Cash and cash equivalents, accounts receivable and accounts
    payable  For those short term instruments, the
    carrying value is a reasonable estimate of fair value.
    Long term debt  Rates estimated for debt with similar
    terms and remaining maturities to companies in a similar
    financial situation as the Company are used to estimate the fair
    value of existing debt. The carrying value is a reasonable
    estimate of fair value.  Revenue Recognition:
  Allowances Against Accounts Receivable:
 F-6




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  EITF 01-9,
    Inventory Valuation: first-in,
  Royalty Payments:
  Depreciation and Amortization:
  Impairment of Long-lived Assets, Identifiable Intangibles and
    Goodwill:
    Provisions for Income Taxes:
   F-7




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Segments and Related Information: Disclosures about Segments of an Enterprise and
    Related Information ®
  Earnings Per Share: Earnings per Share
  2007


2006


2005(Amounts in thousands,except per share data)Basic Earnings per Share:Net Income

$
7,601


$
7,967


$
2,438Weighted Average Number of Shares
    Outstanding


9,782



9,506



9,505Basic Earnings per Share

$
0.78


$
0.84


$
0.26Diluted Earnings per Share:Net Income

$
7,601


$
7,967


$
2,438Weighted Average Number of Shares
    Outstanding


9,782



9,506



9,505Effect of Dilutive Securities,
    Principally Warrants (Note 6)


256



12,222



12,440Average Shares  Diluted


10,038



21,728



21,945Diluted Earnings per Share

$
0.76


$
0.37


$
0.11   Recently Issued Accounting Standards: The Fair Value Option for Financial Assets and Financial
    Liabilities
  Fair Value Measurements,
 F-8




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Accounting for Uncertainty in Income Taxes  an
    interpretation of FASB Statement No. 109
  Note 3 
    Acquisitions    AggregateGross


Estimated





AmortizationCarrying


Useful


Accumulated


Expense inAmount


Life


Amortization


2007Tradename

$
466,387



15 years


$
7,773


$
7,773Existing Designs


35,924



1 year







Non-compete


97,689



15 years



1,628



1,628$
600,000






$
9,401


$
9,401     2008


2009


2010


2011


2012Tradename

$
31,092


$
31,092


$
31,092


$
31,092


$
31,092Existing Designs


35,924















Non-compete


6,513



6,513



6,513



6,513



6,513$
73,529


$
37,605


$
37,605


$
37,605


$
37,605   Note 4 
    Churchill
    Weavers     F-9




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Note 5 
    Inventories    April 1, 2007


April 2, 2006Raw Materials

$
15


$
442Work in Process


12



73Finished Goods


7,118



9,227$
7,145


$
9,742     Note 6 
    Financing
    Arrangements  Factoring Agreement:
  Notes Payable and Other Credit Facilities:
  April 1, 2007


April 2, 2006Revolving credit facility

$
2,742


$
Senior subordinated notes






16,000Non-interest bearing notes


4,000



8,000Capital leases


23



58PIK notes






1,077Original issue discount


(966
)


(1,177
)5,799



23,958Less current maturities


19



36$
5,780


$
23,922     Revolving Credit
 F-10




---



##### Table of Contents



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

Revolver


Sub Notes


Other


Total2008

$



$



$
19


$
192009










4



42010


2,742











2,7422011






2,000







2,0002012






2,000







2,000Total

$
2,742


$
4,000


$
23


$
6,765    F-11




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 7 
    Income
    Taxes    2007


2006


2005(In thousands)Current:Federal

$



$
24


$
42State and local


641



275



85Total current


641



299



127Deferred (primarily federal)


2,677



(4,267
)


(22
)Total expense (benefit)

$
3,318


$
(3,968
)

$
105     2007


2006(In thousands)Assets/(Liabilities)Deferred tax asset 
    current:Employee benefit accruals

$
491


$
321Accounts receivable and inventory
    reserves


355



669Net operating loss carryforward


1,220



Other


342



Net deferred tax asset 
    current


2,408



990Deferred tax (liability)
    asset  non-current:Goodwill

$
(831
)

$
(714
)Property, plant and equipment


15



18Net operating loss carryforward






3,796Other


118



297Net deferred tax (liability)
    asset  non-current


(698
)


3,397Net deferred income tax asset

$
1,710


$
4,387    F-12




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2007


2006


2005(In thousands)Tax expense at statutory rate

$
3,712


$
1,266


$
865State income taxes, net of Federal
    income tax benefit


423



182



67Valuation allowance






(5,725
)


(1,076
)Non-deductible expenses


79



272



Non-taxable gain


(1,061
)






Other


165



37



249Income tax expense (benefit)

$
3,318


$
(3,968
)

$
105   Note 8 
    Retirement
    Plans    Note 9 
    Stock-based
    Compensation      Share-Based Payment. Accounting for Stock-Based Compensation Accounting for
    Stock Issued to Employees
 F-13




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
        2006


2005(Amounts in thousands,except per share data)Net income, as reported

$
7,967


$
2,438Deduct: Total stock-based employee
    compensation expense determined under fair value based method
    for all awards


29



67Pro forma net income

$
7,938


$
2,371Earnings per share:Basic  as reported

$
0.84


$
0.26Basic  pro forma

$
0.84


$
0.25Diluted  as reported

$
0.37


$
0.11Diluted  pro forma

$
0.37


$
0.11     Stock Options:
  Weighted-Average


Number of OptionsExercise Price


OutstandingOutstanding, April 2, 2006

$
0.80



536,100Granted


3.15



212,000Exercised


0.65



122,755Forfeited


0.78



31,999Outstanding, April 1, 2007

$
1.68



593,346Exercisable, April 1, 2007

$
0.86



369,352  F-14




---



##### Table of Contents



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


Options Issuedto Employees


to DirectorsOptions Issued


200,000



12,000Dividend Yield






Expected Volatility


70.00
%


70.00
%Risk free interest rate


4.76
%


4.79
%Expected life, years


5.75



3.25Forfeiture rate


5.00
%


5.00
%       Weighted Avg.





Weighted Avg.Number of


Weighted Avg.


Exercise Price


Number of


Exercise PriceOptions


Remaining


of Options


Shares


of SharesRange of Exercise Prices

Outstanding


Contractual Life


Outstanding


Exercisable


Exercisable$0.18


20,000



4.31 years


$
0.18



20,000


$
0.18$0.65


105,164



6.14 years



0.65



101,168



0.65$0.66


9,332



3.36 years



0.66



1,334



0.66$0.71


145,750



5.34 years



0.71



145,750



0.71$1.06-2.31


101,100



3.19 years



1.43



101,100



1.43$3.15


212,000



9.12 years



3.15







0.00593,346











369,352     Non-vested Stock:
     F-15




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Note 10 
    Major
    Customers    Fiscal Year2007


2006


2005Wal-Mart Stores, Inc.


39
%


35
%


29
%Toys R Us


23
%


30
%


36
%Target Corporation


16
%


14
%


12
%   Note 11 
    Commitments
    and Contingencies    Payments Due by PeriodLess Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


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

$
6,742


$



$
2,742


$
4,000


$
Interest on Long-Term Debt


76



33



43







Capital Lease Obligations


23



19



4







Operating Lease Obligations


2,906



1,254



1,651



1



Purchase Obligations


539



82



457







Minimum Royalty Obligations


2,578



2,297



281







Total Contractual Obligations

$
12,864


$
3,685


$
5,178


$
4,001


$
      F-16




---



##### Table of Contents



Crown
    Crafts, Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 12 
    Selected
    Quarterly Financial Information (unaudited)  First


Second


Third


FourthQuarter


Quarter(1)


Quarter


QuarterIn thousands, except per share dataFiscal Year ended April 1,
    2007Net sales

$
16,164


$
21,574


$
16,453


$
17,797Gross profit


4,580



5,753



3,622



4,145Net income


911



5,353



614



723Basic earnings per share


0.10



0.55



0.06



0.07Diluted earnings per share


0.04



0.54



0.06



0.07Fiscal Year ended April 2,
    2006Net sales

$
13,659


$
21,285


$
17,882


$
19,803Gross profit


2,967



4,609



4,325



5,187Net (loss) income


(269
)


1,151



1,063



6,022Basic earnings per share


(0.03
)


0.12



0.11



0.63Diluted earnings per share


(0.03
)


0.05



0.05



0.27     (1)
    
    In the second quarter of fiscal year 2007, the Company recorded
    a gain on refinancing of $4.1 million as discussed in
    Note 6. F-17