EDGAR 10-K Filing

Company CIK: 25895
Filing Year: 2024
Filename: 25895_10-K_2024_0001437749-24-021478.json

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ITEM 1. BUSINESS
ITEM 1. Business
Description of Business
The Company was incorporated as a Georgia corporation in 1957 and was reincorporated as a Delaware corporation in 2003. The Company’s executive offices are located at 916 South Burnside Avenue, Suite 300, Gonzales, Louisiana 70737, its telephone number is (225) 647-9100 and its internet address is www.crowncrafts.com.
The Company operates indirectly through three of its wholly-owned subsidiaries, NoJo Baby & Kids, Inc. (“NoJo”), Sassy Baby, Inc. (“Sassy”) and Manhattan Toy Europe Limited (“MTE”) in the infant, toddler and juvenile products segment within the consumer products industry. The infant, toddler and juvenile products segment consists of infant and toddler bedding and blankets, bibs, soft bath products, disposable products, developmental toys and accessories. Most sales of the Company’s products are generally made directly to retailers, such as mass merchants, large chain stores, mid-tier retailers, juvenile specialty stores, value channel stores, grocery and drug stores, restaurants, wholesale clubs and internet-based retailers. The Company’s products are marketed under a variety of Company-owned trademarks, under trademarks licensed from others and as private label goods.
The Company's fiscal year ends on the Sunday nearest to or on March 31. References herein to “fiscal year 2024” or “2024” represent the 52-week period ended March 31, 2024, and references herein to “fiscal year 2023” or “2023” represent the 52-week period ended April 2, 2023.
On March 17, 2023 (the “Closing Date”), the Company acquired Manhattan Group, LLC (“Manhattan”) and MTE, Manhattan’s then wholly-owned subsidiary (the “Manhattan Acquisition”), for a purchase price of $17.0 million, subject to adjustments for cash as of the Closing Date and to the extent that actual net working capital as of the Closing Date differed from target net working capital of $13.75 million. The Manhattan Acquisition was funded with available cash and borrowings under the Company’s revolving line of credit with The CIT Group/Commercial Services (“CIT”). From the Closing Date through the fiscal year ended March 31, 2024, the Company operated Manhattan as a wholly-owned subsidiary that manufactured and marketed developmental toys. On April 1, 2024, the Company merged Manhattan into Sassy.
The Company makes its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act available free of charge on its website at www.crowncrafts.com as soon as reasonably practicable after such material has been electronically filed with the SEC. These reports are also available without charge on the SEC’s website at www.sec.gov.
International Sales
Sales to customers in countries other than the U.S. represented 8% and 5% of the Company’s total gross sales during fiscal years 2024 and 2023, respectively. International sales are based upon the location that predominately represents what the Company believes to be the final destination of the products delivered to the Company’s customers.
Competition
The infant, toddler and juvenile consumer products industry is highly competitive. The Company competes with a variety of distributors and manufacturers (both branded and private label), including large infant, toddler and juvenile product companies and specialty infant, toddler and juvenile product manufacturers, on the basis of quality, design, price, brand name recognition, service and packaging. The Company’s ability to compete depends principally on styling, price, service to the retailer and continued high regard for the Company’s products and trade names.
Human Capital Resources
As of May 31, 2024, the Company had 162 employees, all of whom are full-time and none of whom is represented by a labor union or is otherwise a party to a collective bargaining agreement. The Company attracts and maintains qualified personnel by paying competitive salaries and benefits and offering opportunities for advancement. The Company considers its relationship with its employees to be good.
Trademarks, Copyrights and Patents
The Company considers its intellectual property to be of material importance to its business. Sales of products marketed under the Company’s trademarks, including Sassy®, Manhattan Toy®, NoJo® and Neat Solutions® accounted for 38% and 35% of the Company’s total gross sales during fiscal years 2024 and 2023, respectively. Protection for these trademarks is obtained through domestic and foreign registrations. The Company also markets designs that are subject to copyrights and design patents owned by the Company.
Product Sourcing
Foreign and domestic contract manufacturers produce most of the Company’s products, with the largest concentration being in China. The Company makes sourcing decisions on the basis of quality, timeliness of delivery and price, including the impact of ocean freight and duties. Although the Company maintains relationships with a limited number of suppliers, the Company believes that its products may be readily manufactured by several alternative sources in quantities sufficient to meet the Company’s requirements. The Company’s management and quality assurance personnel visit the third-party facilities regularly to monitor and audit product quality and to ensure compliance with labor requirements and social and environmental standards. In addition, the Company closely monitors the currency exchange rate. The impact of future fluctuations in the exchange rate or changes in safeguards cannot be predicted with certainty.
The Company maintains a foreign representative office located in Shanghai, China, which is responsible for the coordination of production, purchases and shipments, seeking out new vendors and overseeing inspections for social compliance and quality.
The Company’s products are warehoused and distributed domestically from leased facilities located in Compton, California and Eden Valley, Minnesota and internationally from third-party logistics warehouses in Belgium and the United Kingdom.
Licensed Products
Certain products are manufactured and sold pursuant to licensing agreements for trademarks. Also, many of the designs used by the Company are copyrighted by other parties, including trademark licensors, and are available to the Company through copyright license agreements. The licensing agreements are generally for an initial term of one to three years and may or may not be subject to renewal or extension. Sales of licensed products represented 40% of the Company’s gross sales in fiscal year 2024, which included 24% of sales under the Company’s license agreements with affiliated companies of The Walt Disney Company (“Disney”), which expire as set forth below:
License Agreement
Expiration
Infant Bedding
December 31, 2025
Infant Feeding and Bath
December 31, 2024
Toddler Bedding
December 31, 2024
Marvel
December 31, 2024
STAR WARS Toddler Bedding
December 31, 2024
STAR WARS - Lego Plush
December 31, 2025
Customers
The Company’s customers consist principally of mass merchants, large chain stores, mid-tier retailers, juvenile specialty stores, value channel stores, grocery and drug stores, restaurants, internet accounts and wholesale clubs. The Company does not enter into long-term or other purchase agreements with its customers. The table below sets forth those customers that represented at least 10% of the Company’s gross sales in fiscal years 2024 and 2023.
Fiscal Year
Walmart Inc.
42%
51%
Amazon.com, Inc.
19%
20%
Products
The Company’s primary focus is on infant, toddler and juvenile products, including the following:
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developmental toys
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dolls and plush toys
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reusable and disposable bibs
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infant and toddler bedding
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blankets and swaddle blankets
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nursery and toddler accessories
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room décor
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burp cloths
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reusable and disposable placemats and floor mats
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disposable toilet seat covers and changing mats
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feeding and care goods
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other infant, toddler and juvenile soft goods
Seasonality and Inventory Management
Approximately 20% of the Company’s annual gross sales typically occur during the first fiscal quarter (April through June). There are otherwise no significant variations in the seasonal demand for the Company’s products from year to year. Sales are generally higher in periods when customers take initial shipments of new products, as these orders typically include enough products for initial sets for each store and additional quantities for the customer’s distribution centers. The timing of these initial shipments varies by customer and depends on when the customer finalizes store layouts for the upcoming year and whether the customer has any mid-year introductions of products. Sales may also be higher or lower, as the case may be, in periods when customers are restricting internal inventory levels. Customer returns of merchandise shipped are historically less than 1% of gross sales.
Consistent with the expected introduction of specific product offerings, the Company carries necessary levels of inventory to meet the anticipated delivery requirements of its customers. The Company will also typically increase the purchases and inventory levels of its products in the months prior to the Lunar New Year, a celebration beginning in late January to mid-February during which the Company’s contract manufacturers in China cease operations for 2-4 weeks.
Government Regulation and Environmental Control
The Company is subject to various federal, state and local environmental laws and regulations, which regulate, among other things, product safety and the discharge, storage, handling and disposal of a variety of substances and wastes, and to laws and regulations relating to employee safety and health, principally the Occupational Safety and Health Administration Act and regulations thereunder. The Company believes that it currently complies in all material respects with applicable environmental, health and safety laws and regulations and that future compliance with such existing laws or regulations will not have a material adverse effect on its capital expenditures, earnings or competitive position. However, there is no assurance that such requirements will not become more stringent in the future or that the Company will not have to incur significant costs to comply with such requirements.
Product Design and Styling
The Company believes that its creative team is one of its key strengths. The Company’s product designs are primarily created internally and are supplemented by numerous additional sources, including independent artists, decorative fabric manufacturers and apparel designers. Ideas for product design creations are drawn from various sources and are reviewed and modified by the design staff to ensure consistency within the Company’s existing product offerings and the themes and images associated with such existing products. In order to respond effectively to changing consumer preferences, the Company’s designers and stylists attempt to stay abreast of emerging lifestyle trends in color, fashion and design. When designing products under the Company’s various licensed brands, the Company’s designers coordinate their efforts with the licensors’ design teams to provide for a more fluid design approval process and to effectively incorporate the image of the licensed brand into the product. The Company’s designs include traditional, contemporary, textured and whimsical patterns across a broad spectrum of retail price points.
Utilizing state of the art computer technology, the Company continually develops new designs throughout the year for all of its product groups. This continual development cycle affords the Company design flexibility, multiple opportunities to present new products to customers and the ability to provide timely responses to customer demands and changing market trends. The Company also creates designs for exclusive sale by certain of its customers under the Company’s brands, as well as the customers’ private label brands.
Sales and Marketing
The Company’s products are marketed through a national sales force consisting of salaried sales executives and employees located in Gonzales, Louisiana; Compton, California; Minneapolis, Minnesota; Grand Rapids, Michigan; Bentonville, Arkansas; and London, United Kingdom; and by independent commissioned sales representatives located throughout the United States.

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ITEM 1A. RISK FACTORS
ITEM 1A. Risk Factors
The following risk factors as well as the other information contained in this Annual Report and other filings made by the Company with the SEC should be considered in evaluating the Company’s business. Additional risks and uncertainties that are not presently known or that are not currently considered material may also impair the Company’s business operations. If any of the following risks actually occur, then operating results may be affected in future periods.
Risks Associated with the Company, Business and Industry
The loss of one or more of the Company’s key customers could result in a material loss of revenues.
The Company’s top two customers represented approximately 61% of gross sales in fiscal year 2024. Although the Company does not enter into contracts with its key customers, it expects its key customers to continue to be a significant portion of its gross sales in the future. The loss of, or a decline in orders from, one or more of these customers could result in a material decrease in the Company’s revenue and operating income.
The loss of one or more of the Company’s licenses could result in a material loss of revenues.
Sales of licensed products represented 40% of the Company’s gross sales in fiscal year 2024, which included 24% of sales associated with the Company’s license agreements with Disney. The Company could experience a material loss of revenues if it is unable to renew its major license agreements or obtain new licenses. The volume of sales of licensed products is inherently tied to the success of the characters, films and other licensed programs of the Company’s licensors. A decline in the popularity of these licensed programs or the inability of the licensors to develop new properties for licensing could also result in a material loss of revenues to the Company. Additionally, the Company’s license agreements with Disney and others require a material amount of minimum guaranteed royalty payments. The failure by the Company to achieve the sales envisioned by the license agreements could result in the payment by the Company of shortfalls in the minimum guaranteed royalty payments, which would adversely impact the Company’s operating results.
Growing geopolitical tensions could adversely affect the Company’s operations and profitability.
Mounting terrorist activity, ongoing wars and violence in the Middle East and Ukraine, the potential for the escalation of China’s aggression towards Taiwan and the increasingly erratic behavior of North Korea have resulted in growing geopolitical tensions. Nearly all nations have felt the effects of global economic uncertainty, including higher energy and food prices. These uncertainties could result in a slowdown to the global economy that may affect the Company’s business by reducing the prices that the Company’s customers may be willing or able to pay for its products or by reducing the demand for the Company’s products, which could negatively impact the Company’s revenues and result in a material adverse effect on the Company’s business, cash flow, results of operations and financial condition.
Climate change may negatively affect the Company’s business, results of operations, cash flow and financial condition.
The Company is exposed to risks associated with climate change. The adverse impacts of climate change include the increased frequency and severity of natural disasters and extreme weather events, including hurricanes, tornados, wildfires, extreme heat, rising sea levels and inland flooding. The occurrence of one or more of these events pose a physical risk to the Company’s facilities, as well as those of its customers, suppliers and employees, the likelihood of a loss of the Company’s inventory and an overall disruption to the Company’s operations. Climate change has the potential to result in a material adverse effect on the Company’s business, cash flow, results of operations and financial condition.
The Company’s inability to anticipate and respond to consumers’ tastes and preferences could adversely affect the Company’s revenues.
Sales are driven by consumer demand for the Company’s products. There can be no assurance that the demand for the Company’s products will not decline or that the Company will be able to anticipate and respond to changes in demand related to consumers’ tastes and preferences. The infant and toddler consumer products industry is characterized by the continual development of cutting-edge new products to meet the high standards of parents. Also, the development of social media has resulted in a monumental shift in the modern shopping experience. The Company’s failure to adapt to these changes, develop new products or reach consumers where they are could lead to lower sales and excess inventory, which could have a material adverse effect on the Company’s financial condition and operating results.
The Company’s sourcing and marketing operations in foreign countries are subject to anti-corruption laws.
The Company’s foreign operations are subject to laws prohibiting improper payments and bribery, including the U.S. Foreign Corrupt Practices Act and similar laws and regulations in foreign jurisdictions, which apply to the Company’s directors, officers, employees and agents acting on behalf of the Company. Failure to comply with these laws could result in damage to the Company’s reputation, a diversion of management’s attention from its business, increased legal and investigative costs, and civil and criminal penalties, any or all of which could adversely affect the Company’s operating results.
The Company’s business is impacted by general economic conditions and related uncertainties, including a declining birthrate, affecting markets in which the Company operates.
The Company’s growth is largely influenced by the birthrate, and in particular, the rate of first births. Geopolitical risks and economic conditions, including the real and perceived threat of wars, terrorism, tension among nations, rising prices or unemployment, could lead individuals to decide to forgo or delay having children. Even under optimal conditions, shifts in demographic trends and preferences could have the consequence of individuals starting to have children later in life and/or having fewer children.
In recent years, the birthrate in the United States has steadily declined. These conditions could result in reduced demand for some of the Company’s products, increased order cancellations and returns, an increased risk of excess and obsolete inventories and increased pressure on the prices of the Company’s products. Also, although the Company’s use of a commercial factor significantly reduces the risk associated with collecting accounts receivable, such factor may at any time terminate or limit its approval of shipments to a particular customer. The bankruptcy of a customer, the perceived pending threat of a bankruptcy of a customer, or an adverse change in overall economic conditions are among the events that would increase the likelihood that the factor would terminate or limit its approval of shipments to customers. Such an action by the factor could result in the loss of future sales to such affected customers.
Economic conditions could result in an increase in the amounts paid for the Company’s products.
Significant increases in freight costs and the price of raw materials that are components of the Company’s products, including cotton, oil and labor, could adversely affect the amounts that the Company must pay its suppliers for its finished goods. If the Company is unable to pass these cost increases along to its customers, its profitability could be adversely affected.
The Company could experience losses associated with its intellectual property.
The Company relies upon the fair interpretation and enforcement of patent, copyright, trademark and trade secret laws in the U.S., similar laws in other countries, and agreements with employees, customers, suppliers, licensors and other parties. Such reliance serves to establish and maintain the intellectual property rights associated with the products that the Company develops and sells. However, the laws and courts of certain countries at times do not protect intellectual property rights or respect contractual agreements to the same extent as the laws of the U.S. Therefore, in certain jurisdictions the Company may not be able to protect its intellectual property rights against counterfeiting or enforce its contractual agreements with other parties. Finally, a party could claim that the Company is infringing upon such party’s intellectual property rights, and claims of this type could lead to a civil complaint. An unfavorable outcome in litigation involving intellectual property could result in any or all of the following: (i) civil judgments against the Company, which could require the payment of royalties on both past and future sales of certain products, as well as plaintiff’s attorneys’ fees and other litigation costs; (ii) impairment charges of up to the carrying value of the Company’s intellectual property rights; (iii) restrictions on the ability of the Company to sell certain of its products; (iv) legal and other costs associated with investigations and litigation; and (v) adverse effects on the Company’s competitive position.
Widespread outbreaks of contagious disease may adversely affect the Company’s business operations, employee availability, financial condition, liquidity and cash flow.
Significant outbreaks of contagious diseases could have adverse effects on the overall economy and impact the Company’s supply chain, manufacturing and distribution operations, transportation services, customers and employees, as well as consumer sentiment in general and traffic within the retail stores that carry the Company’s products. A pandemic could adversely affect the Company’s revenues, earnings, liquidity and cash flows and require significant actions in response, including employee furloughs, closings of Company facilities, expense reductions or discounts of the pricing of the Company’s products, all in an effort to mitigate such effects.
During fiscal years 2022 and 2021, the COVID-19 pandemic led global government authorities to implement numerous public health measures, including quarantines, business closures, travel bans and lockdowns to confront the pandemic. China’s efforts to control the spread of the COVID-19 virus by locking down its largest cities placed a strain on already-stressed global supply chains. Several of the Company’s customers experienced financial difficulties as a result of the COVID-19 pandemic.
A resurgence of the COVID-19 pandemic, or any other outbreak of a contagious disease, could adversely affect the Company’s revenues, earnings, liquidity and cash flows and may require significant actions in response, including employee furloughs, closings of Company facilities, expense reductions or discounts of the pricing of the Company’s products, all in an effort to mitigate such effects.
The strength of the Company’s competitors may impact the Company’s ability to maintain and grow its sales, which could decrease the Company’s revenues.
The infant and toddler consumer products industry is highly competitive. The Company competes with a variety of distributors and manufacturers, both branded and private label. The Company’s ability to compete successfully depends principally on styling, price, service to the retailer and continued high regard for the Company’s products and trade names. Several of these competitors are larger than the Company and have greater financial resources than the Company, and some have experienced financial challenges from time to time, including servicing significant levels of debt. Those facing financial pressures could choose to make particularly aggressive pricing decisions in an attempt to increase revenue. Competitors based in China have begun to sell and ship directly to customers without having to rely on distributors in the destination country, making their products more affordable. The effects of increased competition could result in a material decrease in the Company’s revenues.
The Company’s success is dependent upon retaining key management personnel.
Certain of the Company’s executive management and other key personnel have been integral to the Company’s operations and the execution of its growth strategy. The departure from the Company of one or more of these individuals, along with the inability of the Company to attract qualified and suitable individuals to fill the Company’s open positions, could adversely impact the Company’s growth and operating results.
The Company may need to write down or write off inventory.
If product programs end before the inventory is completely sold, then the remaining inventory may have to be sold at less than carrying value. The market value of certain inventory items could drop to below carrying value after a decline in sales, at the end of programs, or when management makes the decision to exit a product group. Such inventory would then need to be written down to the lower of carrying or market value, or possibly completely written off, which would adversely affect the Company’s operating results.
Recalls or product liability claims could increase costs or reduce sales.
The Company must comply with the Consumer Product Safety Improvement Act, which imposes strict standards to protect children from potentially harmful products and which requires that the Company’s products be tested to ensure that they are within acceptable levels for lead and phthalates. The Company must also comply with related regulations developed by the Consumer Product Safety Commission and similar state regulatory authorities. The Company’s products could be subject to involuntary recalls and other actions by these authorities, and concerns about product safety may lead the Company to voluntarily recall, accept returns or discontinue the sale of select products. Product liability claims could exceed or fall outside the scope of the Company’s insurance coverage. Recalls or product liability claims could result in decreased consumer demand for the Company’s products, damage to the Company’s reputation, a diversion of management’s attention from its business and increased customer service and support costs, any or all of which could adversely affect the Company’s operating results.
The Company could experience adjustments to its effective tax rate or its prior tax obligations, either of which could adversely affect its results of operations.
The Company is subject to income taxes in the many jurisdictions in which it operates, including the U.S., several U.S. states and China. At any particular point in time, several tax years are subject to general examination or other adjustment by these various jurisdictions. Although the Company believes that the calculations and positions taken on its filed income tax returns are reasonable and justifiable, administrative or legal proceedings leading to the outcome of any examination could result in an adjustment to the position that the Company has taken. Such adjustment could result in further adjustment to one or more income tax returns for other jurisdictions, or to income tax returns for prior or subsequent tax years, or both. To the extent that the Company’s reserve for unrecognized tax liabilities is not adequate to support the cumulative effect of such adjustments, the Company could experience a material adverse impact on operating results.
The Company’s provision for income taxes is based on its effective tax rate, which in any given financial statement period could fluctuate based on changes in tax laws or regulations, changes in the mix and level of earnings by taxing jurisdiction, changes in the amount of certain expenses within the consolidated statements of income that will never be deductible on the Company’s income tax returns and certain charges deducted on the Company’s income tax returns that are not included within the consolidated statements of income. These changes could cause fluctuations in the Company’s effective tax rate either on an absolute basis, or in relation to varying levels of the Company’s pre-tax income. Such fluctuations in the Company’s effective tax rate could adversely affect its results of operations.
Changes in international trade regulations and other risks associated with foreign trade could adversely affect the Company’s sourcing.
The Company sources its products primarily from foreign contract manufacturers, with the largest concentration being in China. Difficulties encountered by these suppliers, such as fires, accidents, natural disasters, outbreaks of infectious diseases (including the COVID-19 pandemic) and the instability inherent in operating within an authoritarian political structure, could halt or disrupt production and shipment of the Company’s products. The Chinese government could make allegations against the Company of corruption or antitrust violations, or could adopt regulations related to the manufacture of products within China, including quotas, duties, taxes and other charges or restrictions on the exportation of goods produced in China.
In response to Russia’s invasion of Ukraine, the U.S. government and other allied countries across the world have levied coordinated and wide-ranging economic sanctions against Russia. If China were to escalate its aggression towards Taiwan, similar sanctions could be levied against China, up to and including increased tariffs or a complete ban on the importation of goods manufactured in China, then the Company could be forced to source its products from suppliers in other countries.
The Company’s products are primarily shipped by merchant vessels across the world’s oceans. The intrinsic nature of such shipping includes the risk of intentional or unintentional impediments at the world’s global marine chokepoints, including various straits and the Panama and Suez canals. The recent firing on merchant vessels in the Red Sea by militants of Yemen’s Houthi movement has resulted in the shipment of the Company’s products from China to Europe to be routed around Africa, just as the Company has been benefitting from increased sales in Europe. These and any other events causing a disruption of the flow of the Company’s products, whether within the Chinese interior, at the port of embarkation, on global waters, or at the destination port, could result in delays in shipping.
Most of the Company’s products are imported from China into the Port of Long Beach in Southern California and the Port of Prince Rupert in British Columbia. There are many links in the distribution chain, including the availability of ocean freight, cranes, dockworkers, containers, tractors, chassis and drivers. The timely receipt of the Company’s products is dependent upon efficient operations at these ports. Any shortages in the availability of any of these links or disruptions in port operations, including strikes, lockouts or other work stoppages or slowdowns, could cause bottlenecks and other congestion in the distribution network, which could adversely impact the Company’s ability to obtain adequate inventory on a timely basis and result in lost sales, increased transportation costs and an overall decrease of the Company’s profits.
Any of these actions could result in lost sales, increased transportation costs and ultimately the inability of the Company to maintain the current sourcing of its products. Also, an arbitrary strengthening of the Chinese currency versus the U.S. Dollar could increase the prices at which the Company purchases finished goods. In addition, changes in U.S. customs procedures or delays in the clearance of goods through customs could result in the Company being unable to deliver goods to customers in a timely manner or the potential loss of sales altogether. The occurrence of any of these events could adversely affect the Company’s profitability.
Disruptions to the Company’s information technology systems could negatively affect the Company’s results of operations.
The Company’s operations are highly dependent upon computer hardware and software systems, including customized information technology systems and cloud-based applications. The Company also employs third-party systems and software that are integral to its operations. These systems are vulnerable to cybersecurity incidents, including disruptions and security breaches, which can result from unintentional events or deliberate attacks by insiders or third parties, such as cybercriminals, competitors, nation-states, computer hackers and other cyber terrorists. The Company faces an evolving landscape of cybersecurity threats in which evildoers use a complex array of means to perpetrate attacks, including the use of stolen access credentials, malware, ransomware, phishing, structured query language injection attacks and distributed denial-of-service attacks.
The Company has implemented both passive and active cybersecurity measures to securely maintain confidential and proprietary information stored on the Company’s information systems and continually invests in maintaining and upgrading the systems and applications to mitigate these risks. In addition to firewalls, antivirus software and intrusion detection, the Company’s passive cybersecurity measures include multifactor authentication for external access to the Company’s cyber networks. The Company’s active cybersecurity measures are designed to detect and prevent live ransomware attacks, insider threats and data breaches. There is no assurance that these measures and technology will adequately prevent an intrusion or that a third party that is relied upon by the Company will not suffer an intrusion, that unauthorized individuals will not gain access to confidential or proprietary information or that any such incident will be timely detected and effectively countered. A significant data security breach could result in negative consequences, including a disruption to the Company’s operations and substantial remediation costs, such as liability for stolen assets or information, repairs of system damage, and incentives to customers or other business partners in an effort to maintain relationships after an attack. An assault against the Company’s information technology infrastructure could also lead to other adverse impacts to its results of operations such as increased future cybersecurity protection costs, which may include making organizational changes, deploying additional personnel and protection technologies, and engaging third-party experts and consultants.
Customer pricing pressures could result in lower selling prices, which could negatively affect the Company’s operating results.
The Company’s customers could place pressure on the Company to reduce the prices of its products. The Company continuously strives to stay ahead of its competition in sourcing, which allows the Company to obtain lower cost products while maintaining high standards for quality. There can be no assurance that the Company could respond to a decrease in sales prices by proportionately reducing its costs, which could adversely affect the Company’s operating results.
General Risk Factors
The Company’s ability to successfully identify, consummate and integrate acquisitions, divestitures and other significant transactions could have an adverse impact on the Company’s business and financial results.
As part of its business strategy, the Company has made acquisitions of businesses, divestitures of businesses and assets, and has entered into other transactions to further the interests of the Company’s business and its stockholders. Risks associated with such activities include the following, any of which could adversely affect the Company’s financial results:
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The active management of acquisitions, divestitures and other significant transactions requires varying levels of Company resources, including the efforts of the Company’s key management personnel, which could divert attention from the Company’s ongoing business operations.
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The Company may not fully realize the anticipated benefits and expected synergies of any particular acquisition or investment, or may experience a prolonged timeframe for realizing such benefits and synergies.
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Increased or unexpected costs, unanticipated delays or failure to meet contractual obligations could make acquisitions and investments less profitable or unprofitable.
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The failure to retain executive management members and other key personnel of the acquired business that may have been integral to the operations and the execution of the growth strategy of the acquired business.
The Company’s debt covenants may affect its liquidity or limit its ability to pursue acquisitions, incur debt, make investments, sell assets or complete other significant transactions.
The Company’s credit facility contains usual and customary covenants regarding significant transactions, including restrictions on other indebtedness, liens, investments and acquisitions, merger or consolidation transactions, transactions with affiliates and changes in or amendments to the organizational documents for the Company and its subsidiaries. Unless waived by the Company’s lender, these covenants could limit the Company’s ability to pursue opportunities to expand its business operations, respond to changes in business and economic conditions and obtain additional financing, or otherwise engage in transactions that the Company considers beneficial.
The Company’s ability to comply with its credit facility is subject to future performance and other factors.
The Company’s ability to make required payments of principal and interest on its debts, to refinance its maturing indebtedness, to fund capital expenditures or to comply with its debt covenants will depend upon future performance. The Company’s future performance is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors beyond its control. The breach of any of the debt covenants could result in a default under the Company’s credit facility. Upon the occurrence of an event of default, the Company’s lender could make an immediate demand of the amount outstanding under the credit facility. If a default was to occur and such a demand was to be made, there can be no assurance that the Company’s assets would be sufficient to repay the indebtedness in full.
A stockholder could lose all or a portion of his or her investment in the Company.
The Company’s common stock has historically experienced a degree of price variability, and the price could be subject to rapid and substantial fluctuations. The Company’s common stock has also historically been thinly traded, a circumstance that exists when there is a relatively small volume of buy and sell orders for the Company’s common stock at any given point in time. In such situations, a stockholder may be unable to liquidate his or her position in the Company’s common stock at the desired price. Also, as an equity investment, a stockholder’s investment in the Company is subordinate to the interests of the Company’s creditors, and a stockholder could lose all or a substantial portion of his or her investment in the Company in the event of a bankruptcy filing or liquidation.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
ITEM 2. Properties
Each of the Company’s facilities are rented under leases that expire on various dates through fiscal year 2029, including 157,400 square feet at a warehouse and distribution facility located in Compton, California under a lease that expires May 31, 2028, 128,074 square feet at a warehouse and distribution facility located in Eden Valley, Minnesota under a lease that expires June 30, 2026, 16,837 square feet at Manhattan’s headquarters facility located in Minneapolis, Minnesota under a lease that expires March 31, 2027 and 15,598 square feet at the Company’s headquarters facility located in Gonzales, Louisiana under a lease that expires January 31, 2026. In addition, several employees of the Company perform their respective job functions from remote locations for which no rent is paid. Management believes that its properties are suitable for the purposes for which they are used, are in generally good condition and provide adequate capacity for current and anticipated future operations. The table below sets forth certain information regarding the Company's principal real property as of the close of business on May 31, 2024.
Location
Use
Approximate
Square Feet
Owned/
Leased
Gonzales, Louisiana
Administrative and sales office
15,598
Leased
Compton, California
Offices, warehouse and distribution center
157,400
Leased
Minneapolis, Minnesota
Product design and sales office
16,837
Leased
Eden Valley, Minnesota
Warehouse and distribution center
128,074
Leased
Grand Rapids, Michigan
Product design office
5,711
Leased
London, United Kingdom
Sales office
1,800
Leased
Shanghai, People’s Republic of China
Office
1,912
Leased

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. Legal Proceedings
The Company is, from time to time, involved in various legal proceedings relating to claims arising in the ordinary course of its business. Neither the Company nor any of its subsidiaries is a party to any such legal proceeding the outcome of which, individually or in the aggregate, is expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. Mine Safety Disclosures
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company's common stock is traded on the Nasdaq Capital Market under the symbol “CRWS”. As of May 31, 2024, there were 155 record holders of the Company’s common stock.
The Company has historically paid cash dividends. The Company’s payment of dividends is and will continue to be restricted by or subject to, among other limitations, applicable provisions of federal and state laws, the Company’s earnings and various business considerations, including the Company’s financial condition, results of operations, cash flow, level of capital expenditures, future business prospects and such other matters as the Board and its Capital Committee deem relevant. The Company’s credit facility permits the Company to pay cash dividends on its common stock without limitation, provided there is no default under the credit facility before or as a result of the payment of such dividends.
For information regarding securities of the Company that have been authorized for issuance under equity compensation plans, refer to “Securities Authorized for Issuance under Equity Compensation Plans” in Item 12, Part III. of this Annual Report.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. Reserved

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Objective
The following discussion and analysis is intended to provide material information relevant to an assessment of the Company’s financial condition and results of operations, as well as an evaluation of the amounts and certainty of cash flows from operations and from outside sources. This discussion and analysis is further intended to provide details concerning material events and uncertainties known to management that are reasonably likely to cause reported financial information to not be necessarily indicative of future operating results or future financial condition. This data includes descriptions and amounts of matters that have had a material impact on reported operations, as well as matters that management has assessed to be reasonably likely to have a material impact on future operations. Management expects that this discussion and analysis will enhance a reader’s understanding of the Company’s financial condition, results of operations, cash flows, liquidity and capital resources. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report.
Results of Operations
The following table contains results of operations for the fiscal years ended March 31, 2024 and April 2, 2023 and the dollar and percentage changes for those periods (in thousands, except percentages).
Change
$
%
Net sales by category:
Bedding, blankets and accessories
$ 32,036
$ 36,747
$ (4,711 )
-12.8 %
Bibs, toys and disposable products
55,596
38,306
17,290
45.1 %
Total net sales
87,632
75,053
12,579
16.8 %
Cost of products sold
64,632
55,225
9,407
17.0 %
Gross profit
23,000
19,828
3,172
16.0 %
% of net sales
26.2 %
26.4 %
Marketing and administrative expenses
16,105
12,655
3,450
27.3 %
% of net sales
18.4 %
16.9 %
Interest (expense) income - net
(734 )
(815 )
-1006.2 %
Other (expense) income - net
(105 )
-61.0 %
Income tax expense
1,334
1,776
(442 )
-24.9 %
Net income
4,894
5,650
(756 )
-13.4 %
% of net sales
5.6 %
7.5 %
Net Sales:
Sales increased to $87.6 million for the fiscal year ended March 31, 2024, compared with $75.1 million in the fiscal year ended April 2, 2023, an increase of $12.6 million, or 16.8%. Sales of bedding, blankets and accessories decreased by $4.7 million, and sales of bibs, toys and disposable products increased by $17.3 million. Although Manhattan generated net sales of $18.5 million of developmental toy, feeding and baby care products during the fiscal year ended March 31, 2024, sales of bedding, blankets and accessories were lower due to the continued overall softness of that market, the impact of retailers that have been managing inventory levels and consumers that have lowered their spending due to inflationary pressures.
Gross Profit:
Gross profit increased by $3.2 million and decreased from 26.4% of net sales for the fiscal year ended April 2, 2023 to 26.2% of net sales for the fiscal year ended March 31, 2024. The gross profit from Manhattan was $4.3 million in the current year, which was $4.1 million higher than the prior year. This increase in the gross profit amount for the current year was partially offset by an increase in operating lease costs in the current year, which were $2.5 million higher than the prior year, and which included $615,000 in higher operating lease costs of Manhattan.
Marketing and Administrative Expenses:
Marketing and administrative expenses increased by $3.5 million and increased from 16.9% of net sales for fiscal year 2023 to 18.4% of net sales for fiscal year 2024. The increase in the current year was primarily due to costs incurred by Manhattan and MTE, which were $3.9 million higher than the prior year, and which included credit losses and advertising costs that were $360,000 and $213,000 higher than the prior year, respectively.
Income Tax Expense:
The Company’s provision for income taxes is based upon an annual effective tax rate (“ETR”) on continuing operations, which was 21.4% and 23.2% for the fiscal years ended March 31, 2024 and April 2, 2023, respectively. The ETR on continuing operations combined with certain discrete income tax charges and benefits resulted in an overall provision for income taxes of 21.4% and 23.9% for the fiscal years ended March 31, 2024 and April 2, 2023, respectively.
Known Trends and Uncertainties
The Company’s financial results are closely tied to sales to the Company’s top two customers, which represented approximately 61% of the Company’s gross sales in fiscal year 2024. A significant downturn experienced by either or both of these customers could lead to decreased sales.
During fiscal year 2024, consumers responded to macroeconomic conditions by trading down to lower priced items, buying fewer items, or foregoing some items altogether due to inflationary concerns. The Company monitors the impact of inflation on its operations on an ongoing basis and may need to adjust its prices to mitigate the impact of changes to the rate of inflation in future periods. Future volatility of prices could affect consumer purchases of our products. Additionally, the impact of inflation on input and other operational costs could adversely affect the Company's financial results.
Significant outbreaks of contagious diseases have had adverse effects on the overall economy and impact the Company’s supply chain, manufacturing and distribution operations, transportation services, customers and employees, as well as consumer sentiment in general and traffic within the retail stores that carry the Company’s products. Specifically, the COVID-19 pandemic led global government authorities to implement numerous public health measures, including quarantines, business closures and lockdowns to confront the pandemic. China’s efforts to control the spread of the COVID-19 virus by locking down its largest cities placed a strain on already-stressed global supply chains. Several of the Company’s customers experienced financial difficulties as a result of the COVID-19 pandemic.
A resurgence of the COVID-19 pandemic, or any other outbreak of a contagious disease, could adversely affect the Company’s revenues, earnings, liquidity and cash flows and may require significant actions in response, including employee furloughs, closings of Company facilities, expense reductions or discounts of the pricing of the Company’s products, all in an effort to mitigate such effects.
For an additional discussion of trends, uncertainties and other factors that could impact the Company’s operating results, refer to “Risk Factors” in Item 1A, Part I. of this Annual Report.
Financial Position, Liquidity and Capital Resources
Net cash provided by operating activities decreased from $7.7 million for the fiscal year ended April 2, 2023 to $7.1 million for the fiscal year ended March 31, 2024. The Company in the current year experienced a decrease in its accounts receivable balances that was $3.1 million lower than the decrease in the prior year, and the Company in the current year experienced a decrease in its accounts payable balances that was $2.3 million higher than the decrease in the prior year. Offsetting these decreases in cash provided by operating activities was a decrease in inventory in the current year that was $4.6 million higher than the increase in the prior year.
Net cash used in investing activities was $193,000 in the fiscal year ended March 31, 2024 compared with $16.9 million in the fiscal year ended April 2, 2023. The decrease in the current year was primarily due to the $16.1 million payment that was made in the prior year to complete the Manhattan Acquisition, net of cash acquired of $1.3 million.
Net cash used in financing activities was $7.8 million in the fiscal year ended March 31, 2024 compared with $9.3 million in cash provided by financing activities in the fiscal year ended April 2, 2023. The Company incurred net borrowings under its revolving line of credit of $12.7 million in the prior year, such borrowings primarily being required to fund the Manhattan Acquisition, compared with $4.6 million in net repayments under its revolving line of credit in the current year.
The Company’s future performance is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors beyond its control. Based upon the current level of operations, the Company believes that its cash flow from operations and the availability on its revolving line of credit will be adequate to meet its liquidity needs.
The Company’s credit facility at March 31, 2024 consisted of a revolving line of credit under a financing agreement with CIT of up to $35.0 million, which includes a $1.5 million sub-limit for letters of credit. The financing agreement matures on July 11, 2028, bears interest at the rate of prime minus 0.5% or the Secured Overnight Financing Rate (“SOFR”) plus 1.6%, and which is secured by a first lien on all assets of the Company. At March 31, 2024, the Company had elected to pay interest on balances owed under the revolving line of credit, if any, under the SOFR option, which was 6.9%. The financing agreement also provides for the payment by CIT to the Company of interest on daily negative balances, if any, held by CIT at the rate of prime as of the beginning of the calendar month minus 2.0%.
As of March 31, 2024, there was a balance of $8.1 million owed on the revolving line of credit, there was no letter of credit outstanding and $19.2 million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances. As of April 2, 2023, there was a balance of $12.7 million owed on the revolving line of credit, there was no letter of credit outstanding and $20.0 million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.
The financing agreement contains usual and customary covenants for agreements of that type, including limitations on other indebtedness, liens, transfers of assets, investments and acquisitions, merger or consolidation transactions, transactions with affiliates, and changes in or amendments to the organizational documents for the Company and its subsidiaries. The Company believes it was in compliance with these covenants as of March 31, 2024.
To reduce its exposure to credit losses, the Company assigns substantially all of its trade accounts receivable to CIT pursuant to factoring agreements, which have expiration dates that are coterminous with that of the financing agreement described below. Under the terms of the factoring agreements, CIT remits customer payments to the Company as such payments are received by CIT.
CIT bears credit losses with respect to assigned accounts receivable from approved shipments, while the Company bears the responsibility for adjustments from customers related to returns, allowances, claims and discounts. CIT may at any time terminate or limit its approval of shipments to a particular customer. If such a termination or limitation occurs, the Company either assumes (and may seek to mitigate) the credit risk for shipments to the customer after the date of such termination or limitation or discontinues shipments to the customer. Factoring fees, which are included in marketing and administrative expenses in the accompanying consolidated statements of income, were $353,000 and $287,000 during fiscal years 2024 and 2023, respectively.
Critical Accounting Policies and Estimates
The Company prepares its financial statements to conform with accounting principles generally accepted in the U.S. (“GAAP”) as promulgated by the Financial Accounting Standards Board (“FASB”). References herein to GAAP are to topics within the FASB Accounting Standards Codification (the “FASB ASC”), which the FASB periodically revises through the issuance of an Accounting Standards Update (“ASU”) and which has been established by the FASB as the authoritative source for GAAP recognized by the FASB to be applied by nongovernmental entities.
Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated balance sheets and the reported amounts of revenues and expenses during the reporting period. The listing below, while not inclusive of all of the Company's accounting policies, sets forth those accounting policies which the Company's management believes embody the most significant judgments due to the uncertainties affecting their application and the likelihood that materially different amounts would be reported under different conditions or using different assumptions.
Revenue Recognition: Revenue is recognized upon the satisfaction of all contractual performance obligations and the transfer of control of the products sold to the customer. The majority of the Company’s sales consists of single performance obligation arrangements for which the transaction price for a given product sold is equivalent to the price quoted for the product, net of any stated discounts applicable at a point in time. Each sales transaction results in an implicit contract with the customer to deliver a product as directed by the customer. Shipping and handling costs that are charged to customers are included in net sales, and the Company’s costs associated with shipping and handling activities are included in cost of products sold.
Revenue from sales made directly to consumers is recorded when the shipped products have been received by customers, and excludes sales taxes collected on behalf of governmental entities. Revenue from sales made to retailers is recorded when legal title has been passed to the customer based upon the terms of the customer’s purchase order, the Company’s sales invoice, or other associated relevant documents. Such terms usually stipulate that legal title will pass when the shipped products are no longer under the control of the Company, such as when the products are picked up at the Company’s facility by the customer or by a common carrier. Payment terms can vary from prepayment for sales made directly to consumers to payment due in arrears (generally, 60 days of being invoiced) for sales made to retailers.
Allowances Against Accounts Receivable: The Company estimates certain allowances from revenues recognized through sales made to its customers. These allowances include anticipated returns and claims, expected credit losses, chargebacks related to negotiated customer terms and discounts, cooperative advertising allowances, warehouse allowances, placement fees, volume rebates, coupons, discounts and other allowances.
The allowance for anticipated returns and claims is estimated based upon the Company’s historical experience with actual returns and claims, combined with the consideration of events that could result in a change from historical rates on a per-customer basis. The allowance for anticipated returns and claims is recorded as a reduction of net sales in the reporting period within which the related sales are recorded.
To reduce the Company’s exposure to expected credit losses, and to enhance the predictability of its cash flows, the Company assigns substantially all of its receivables under factoring agreements with CIT. In the event that a factored receivable becomes uncollectible due to creditworthiness, CIT bears the risk of loss. With respect to the receivables that are not assigned under factoring agreements with CIT, the Company addresses this credit risk by establishing an allowance that is intended to represent the Company’s best estimate of the expected credit losses for such receivables. In the development of this estimate, the Company makes a number of judgements utilizing the Current Expected Credit Losses (“CECL”) methodology, which requires the Company to estimate lifetime expected credit losses by specifically analyzing the receivables. This analysis incorporates an aging of the receivables, relevant payment history and historical loss experience, as well as the consideration of customer concentrations, customer creditworthiness, negotiated changes to the payment terms of customers, recent economic trends, and expectations regarding economic conditions over a reasonable and supportable future period. The allowance for expected credit losses is included in marketing and administrative expenses in the accompanying consolidated statements of income.
The allowance for chargebacks related to negotiated customer terms and discounts, cooperative advertising, warehouse allowances, placement fees, volume rebates, coupons, discounts and other allowances is recorded commensurate with sales activity or using the straight-line method, as appropriate. The majority of the Company’s allowances for such chargebacks occurs on a per-invoice basis. When a customer requests to have an agreed-upon deduction applied against the customer’s outstanding balance due to the Company, the allowances are correspondingly reduced to reflect such payments or credits issued against the customer’s account balance. The Company analyzes the components of the allowances for customer chargebacks monthly and adjusts the allowances to appropriate levels. Since allowances associated with cooperative advertising are accrued commensurate with sales activity or using the straight-line method, as appropriate, the timing of funding requests for cooperative advertising may result in fluctuations in the allowance from period to period, although such timing should not have a material impact on the consolidated statements of income. The allowance for cooperative advertising is included in marketing and administrative expenses in the consolidated statements of income. All other allowances for chargebacks related to negotiated customer terms and discounts, warehouse allowances, placement fees, volume rebates, coupons and discounts are recorded as a reduction of net sales in the reporting period within which the related sales are recorded.
The Company’s actual experience associated with its allowances against accounts receivable in a future period may differ from the judgements, estimates, analysis and considerations employed in the development of these allowances. Thus, the Company’s allowances against accounts receivable at any point in time may be over-funded or under-funded.
Inventory Valuation: On a periodic basis, management reviews its inventory quantities on hand for obsolescence, physical deterioration, changes in price levels and the existence of quantities on hand which may not reasonably be expected to be sold within the Company’s normal operating cycle. To the extent that any of these conditions is believed to exist or the market value of the inventory expected to be realized in the ordinary course of business is otherwise no longer as great as its carrying value, an allowance against the inventory value is established. To the extent that this allowance is established or increased during an accounting period, an expense is recorded in cost of products sold in the Company's consolidated statements of income. Only when inventory for which an allowance has been established is later sold or is otherwise disposed is the allowance reduced accordingly. Significant management judgment is required in determining the amount and adequacy of this allowance. In the event that actual results differ from management's estimates or these estimates and judgments are revised in future periods, the Company may not fully realize the carrying value of its inventory or may need to establish additional allowances, either of which could materially impact the Company's financial position and results of operations.
Valuation of Long-Lived Assets and Identifiable Intangible Assets: In addition to the systematic annual depreciation and amortization of the Company’s fixed assets and identifiable intangible assets, the Company reviews for impairment long-lived assets and identifiable intangible assets whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. An impairment loss must be recognized if the carrying amount of a long-lived asset group is not recoverable and exceeds its fair value. Assets to be disposed of, if any, are recorded at the lower of net book value or fair market value, less estimated costs to sell at the date management commits to a plan of disposal, and are classified as assets held for sale on the consolidated balance sheets. Actual results could differ materially from those estimates.
Business Combinations: The Company accounts for acquisitions using the acquisition method of accounting in accordance with FASB ASC Topic 805, Business Combinations. An acquisition is accounted for as a purchase and the appropriate account balances and operating activities are recorded in the Company’s consolidated financial statements as of the acquisition date and thereafter. Assets acquired, liabilities assumed and noncontrolling interests, if any, are measured at fair value as of the acquisition date using the appropriate valuation method. The Company may engage an independent third party to assist with these measurements. Goodwill resulting from an acquisition is recognized for the excess of the purchase price over the fair value of the tangible and identifiable intangible assets, less the liabilities assumed. In determining the fair value of the identifiable intangible assets and any noncontrolling interests, the Company uses various valuation techniques, including the income approach, the cost approach and the market approach. These valuation methods require significant management judgement to make estimates and assumptions surrounding projected revenues and costs, growth rates and discount rates. In the event that actual results differ from management’s estimates, the Company may need to recognize an impairment to all or a portion of the carrying value of these assets in a future period, which could materially impact the Company’s financial position and results of operations.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
For a detailed discussion of market risk and other factors that could impact the Company’s operating results, refer to “Risk Factors” in Item 1A. of Part I. of this Annual Report on Form 10-K.
Interest Rate Risk
As of March 31, 2024, the Company had $8.1 million of indebtedness that bears interest at a variable rate, comprised of borrowings under the revolving line of credit. Based upon this level of outstanding debt, the Company’s annual net income would decrease by approximately $64,000 for each increase of one percentage point in the interest rate applicable to the debt.
Commodity Rate Risk
The Company sources its products primarily from foreign contract manufacturers, with the largest concentration being in China. The Company’s exposure to commodity price risk primarily relates to changes in the prices in China of cotton, oil and labor, which are the principal inputs used in a substantial number of the Company’s products. In addition, although the Company pays its Chinese suppliers in U.S. dollars, a strengthening of the rate of the Chinese currency versus the U.S. dollar could result in an increase in the cost of the Company’s finished goods. There is no assurance that the Company could timely respond to such increases by proportionately increasing the prices at which its products are sold to the Company’s customers.
Market Concentration Risk
The Company’s financial results are closely tied to sales to its top two customers, which represented approximately 61% of the Company’s gross sales in fiscal year 2024. In addition, 40% of the Company’s gross sales in fiscal year 2024 consisted of licensed products, which included 24% of sales associated with the Company’s license agreements with affiliated companies of Disney. The Company’s results could be materially impacted by the loss of one or more of these licenses.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. Financial Statements and Supplementary Data
See pages 23 and through of this Annual Report.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this Annual Report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining for the Company adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act (“ICFR”). With the participation of the Chief Executive Officer and the Chief Financial Officer, management conducted an evaluation of the effectiveness of ICFR based on the framework and the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that ICFR was effective as of March 31, 2024.
The Company’s internal control system has been designed to provide reasonable assurance to the Company’s management and the Board regarding the reliability of financial reporting and the preparation and fair presentation of financial statements in accordance with GAAP. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only a reasonable, rather than absolute, assurance that the Company’s financial statements are free of any material misstatement, whether caused by error or fraud.
Changes in Internal Control over Financial Reporting
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the Company’s ICFR as required by Rule 13a-15(d) under the Exchange Act and, in connection with such evaluation, determined that no changes occurred during the Company’s fiscal quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. Other Information
During the quarter ended March 31, 2024, none of the Company’s directors or officers informed the Company of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408(a) of Regulation S-K.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. Directors, Executive Officers and Corporate Governance
The information required by this item will be set forth in the Company’s Proxy Statement for the Annual Meeting of Stockholders to be held in 2024 (the “Proxy Statement”) under the following captions, and the information under such captions is incorporated herein by reference:
●
Board of Directors and Corporate Governance - Board of Directors
●
Board of Directors and Corporate Governance - Director Nominees
●
Board of Directors and Corporate Governance - Continuing Directors
●
Board of Directors and Corporate Governance - Director Qualifications
●
Board of Directors and Corporate Governance - Director Independence
●
Board of Directors and Corporate Governance - Board Committees
●
Board of Directors and Corporate Governance - Attendance at Board Committee Meetings and the Annual Meeting of Stockholders
●
Board of Directors and Corporate Governance - Director Nomination Process
●
Board of Directors and Corporate Governance - Board Diversity
●
Board of Directors and Corporate Governance - Code of Business Conduct and Ethics; Code of Conduct for Directors
●
Proposal 1 - Election of Directors
●
Director Compensation
●
Executive Compensation - Executive Officers
●
Executive Compensation - Compensation Discussion and Analysis - Employment, Severance and Compensation Arrangements
●
Report of the Audit Committee
●
Stock Ownership Information - Delinquent Section 16(a) Reports
●
Certain Relationships and Related Transactions

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. Executive Compensation
The information required by this item will be set forth in the Proxy Statement under the following captions, and the information under such captions is incorporated herein by reference:
●
Board of Directors and Corporate Governance - Board Committees - Compensation Committee
●
Director Compensation
●
Executive Compensation (excluding Pay Versus Performance)
●
Board of Directors and Corporate Governance - Compensation Committee Interlocks and Insider Participation

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be set forth in the Proxy Statement under the following caption, and the information under such caption is incorporated herein by reference:
●
Stock Ownership Information - Security Ownership of Directors, Executive Officers and Certain Beneficial Owners
Securities Authorized for Issuance under Equity Compensation Plans
The table below sets forth information regarding shares of the Company’s common stock that may be issued upon the exercise of options, warrants and other rights granted to employees, consultants or directors under all of the Company’s existing equity compensation plans as of March 31, 2024.
Plan Category
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
Weighted-
average exercise
price of
outstanding
options,
warrants and
rights
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans
Equity compensation plans approved by security holders:
2006 Omnibus Incentive Plan
52,500
$ 7.90
2014 Omnibus Equity Compensation Plan
553,000
$ 7.46
2021 Incentive Plan
290,000
$ 5.75
439,027

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be set forth in the Proxy Statement under the following captions, and the information under such captions is incorporated herein by reference:
●
Introductory Paragraph to Board of Directors and Corporate Governance
●
Board of Directors and Corporate Governance - Director Independence
●
Board of Directors and Corporate Governance - Board Committees
●
Certain Relationships and Related Transactions

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. Principal Accountant Fees and Services
The information required by this item will be set forth in the Proxy Statement under the following captions, and the information under such captions is incorporated herein by reference:
●
Board of Directors and Corporate Governance - Board Committees - Audit Committee
●
Proposal 2 - Ratification of Appointment of Independent Registered Public Accounting Firm
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. Exhibits and Financial Statement Schedules
(a)(1). Financial Statements
The following consolidated financial statements of the Company are included in Part II, Item 8. of this Annual Report:
- Report of Independent Registered Public Accounting Firm
- Consolidated Balance Sheets as of March 31, 2024 and April 2, 2023
- Consolidated Statements of Income for the Fiscal Years Ended March 31, 2024 and April 2, 2023
- Consolidated Statements of Changes in Shareholders' Equity for the Fiscal Years Ended March 31, 2024 and April 2, 2023
- Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2024 and April 2, 2023
- Notes to Consolidated Financial Statements
(a)(2). Financial Statement Schedule
The following financial statement schedule of the Company is included with this Annual Report:
Schedule II - Valuation and Qualifying Accounts
All other schedules not listed above have been omitted because they are not applicable or the required information is included in the financial statements or notes thereto.
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
Balance at Balance at
Beginning
Charged to
End of
of Period
Expenses
Deductions
Period
(in thousands)
Accounts Receivable Valuation Accounts:
Year Ended April 2, 2023
Allowance for customer deductions
$ 945 $ 5,746 $ 5,217 $ 1,474
Year Ended March 31, 2024
Allowance for customer deductions
$ 1,474 $ 6,139 $ 6,443 $ 1,170
Allowance for expected credit losses
$ 0 $ 316 $ 0 $ 316
(a)(3). Exhibits
Exhibits required to be filed by Item 601 of SEC Regulation S-K are included as Exhibits to this Annual Report and listed below.
In reviewing the agreements included as exhibits to this Annual Report, investors are reminded that the agreements are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. Some of the agreements contain representations and warranties made by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
●
Should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
●
Have been qualified by the disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
●
May apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
●
Were made only as of the date of the applicable agreement or such other date or dates may be specified in the agreement and are subject to more recent developments.
Accordingly, the representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Annual Report and the Company’s other public filings with the SEC.
Exhibit
Number
Description of Exhibits
2.1
-
Equity Purchase Agreement, dated as of March 17, 2023, between the Company and H Enterprises International, LLC (“HEI”). (31)
2.2
-
Letter Agreement dated as of July 28, 2023 between the Company and HEI. (33)
2.3
-
Letter Agreement dated as of September 15, 2023 between the Company and HEI. (34)
2.4
-
Letter Agreement dated as of September 29, 2023 between the Company and HEI. (35)
3.1
-
Amended and Restated Certificate of Incorporation of the Company. (1)
3.2
-
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company. (10)
3.3
-
Amended and Restated Bylaws of the Company, effective as of November 14, 2023. (36)
4.1*
-
Crown Crafts, Inc. 2006 Omnibus Incentive Plan (As Amended August 14, 2012). (12)
4.2*
-
Form of Non-Qualified Stock Option Agreement (Employees). (4)
4.3*
-
Crown Crafts, Inc. 2014 Omnibus Equity Compensation Plan. (14)
4.4*
-
Form of Non-Qualified Stock Option Grant Agreement. (15)
4.5*
-
Form of Restricted Stock Grant Agreement. (15)
4.6*
-
Crown Crafts, Inc. 2021 Incentive Plan. (26)
4.7*
-
Form of Incentive Stock Option Grant Agreement. (27)
4.8*
-
Form of Nonstatutory Stock Option Grant Agreement. (27)
4.9*
-
Form of Restricted Stock Grant Agreement. (27)
4.10*
-
Form of Performance Share Grant Agreement (effective February 23, 2022). (28)
4.11
-
Description of Capital Stock (37)
10.1
-
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. (3)
10.2
-
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. (3)
10.3
-
First Amendment to Financing Agreement dated as of November 5, 2007 by and among the Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts Infant Products, Inc. and The CIT Group/Commercial Services, Inc. (5)
10.4*
-
Employment Agreement dated November 6, 2008 by and between the Company and Olivia W. Elliott (6)
10.5
-
Third Amendment to Financing Agreement dated as of July 2, 2009 by and among the Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts Infant Products, Inc. and The CIT Group/Commercial Services, Inc. (7)
10.6
-
Sixth Amendment to Financing Agreement dated as of March 5, 2010 by and among the Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts Infant Products, Inc. and The CIT Group/Commercial Services, Inc. (8)
10.7
-
Seventh Amendment to Financing Agreement dated as of May 27, 2010 by and among the Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts Infant Products, Inc. and The CIT Group/Commercial Services, Inc. (9)
10.8
-
Eighth Amendment to Financing Agreement dated as of March 26, 2012 by and among the Company, Churchill Weavers, Inc., Hamco, Inc., Crown Crafts Infant Products, Inc. and The CIT Group/Commercial Services, Inc. (11)
10.9
-
Ninth Amendment to Financing Agreement dated May 21, 2013 by and among the Company, Hamco, Inc., Crown Crafts Infant Products, Inc. and The CIT Group/Commercial Services, Inc. (13)
10.10
-
Tenth Amendment to Financing Agreement dated as of December 28, 2015 by and among the Company, Hamco, Inc., Crown Crafts Infant Products, Inc. and The CIT Group/Commercial Services, Inc. (16)
10.11
-
Eleventh Amendment to Financing Agreement dated as of March 31, 2016 by and among the Company, Hamco, Inc., Crown Crafts Infant Products, Inc. and The CIT Group/Commercial Services, Inc. (17)
10.12*
-
Amendment No. 1 to the Crown Crafts, Inc. 2014 Omnibus Equity Compensation Plan. (18)
10.13*
-
Form of Incentive Stock Option Grant Agreement (effective November 2016). (18)
10.14*
-
Form of Nonqualified Stock Option Grant Agreement (effective November 2016). (18)
10.15*
-
Form of Restricted Stock Grant Agreement (effective November 2016). (18)
10.16
-
Joinder Agreement dated as of August 4, 2017 by and among the Company, Hamco, Inc., Crown Crafts Infant Products, Inc., Carousel Acquisition, LLC and The CIT Group/Commercial Services, Inc. (19)
10.17
-
Twelfth Amendment to Financing Agreement dated as of December 15, 2017 by and among the Company, Hamco, Inc., Carousel Designs, LLC, Crown Crafts Infant Products, Inc. and The CIT Group/Commercial Services, Inc. (20)
10.18
-
Thirteenth Amendment to Financing Agreement dated as of August 7, 2018 by and among the Company, Hamco, Inc., Carousel Designs, LLC, Crown Crafts Infant Products, Inc. and The CIT Group/Commercial Services, Inc. (21)
10.19*
-
Employment Agreement dated January 18, 2019 by and between NoJo Baby & Kids, Inc. and Donna Sheridan. (22)
10.20*
-
Amendment to Amended and Restated Employment and Severance Protection Agreement dated as of April 14, 2022 by and between the Company and E. Randall Chestnut. (29)
10.21*
-
Employment Agreement dated February 22, 2021 by and between the Company and Craig Demarest. (23)
10.22*
-
Letter Agreement regarding Employment Agreement dated February 22, 2021 by and between the Company and Craig Demarest. (25)
10.23
-
Fourteenth Amendment to Financing Agreement dated as of May 31, 2021, by and among the Company, NoJo Baby & Kids, Inc., Sassy Baby, Inc., Carousel Designs, LLC and The CIT Group/Commercial Services, Inc. (24)
10.24*
-
Performance Share Award Certificate, dated March 1, 2022, between the Company and Olivia W. Elliott. (28)
10.25*
-
Performance Share Award Certificate, dated March 1, 2022, between the Company and Donna E. Sheridan. (28)
10.26*
-
Amendment to Employment Agreement dated June 7, 2022 by and between the Company and Olivia W. Elliott. (30)
10.27
-
Fifteenth Amendment to Financing Agreement dated as of June 2, 2022, by and among the Company, NoJo Baby & Kids, Inc., Sassy Baby, Inc., Carousel Designs, LLC and The CIT Group/Commercial Services, Inc. (30)
10.28
-
Sixteenth Amendment to Financing Agreement, dated as of March 17, 2023, by and among the Company, NoJo Baby & Kids, Inc., Sassy Baby, Inc., Manhattan Group, LLC, Manhattan Toy Europe Limited and the CIT Group/Commercial Services, Inc. (31)
10.29*
-
Amended and Restated Employment Agreement dated June 13, 2023 by and between the Company and Olivia W. Elliott. (32)
14.1
-
Code of Ethics. (2)
21.1
-
Subsidiaries of the Company. (37)
23.1
-
Consent of KPMG LLP. (37)
31.1
-
Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Executive Officer. (37)
31.2
-
Rule 13a-14(a)/15d-14(a) Certification by the Company’s Chief Financial Officer. (37)
32.1
-
Section 1350 Certification by the Company’s Chief Executive Officer. (38)
32.2
-
Section 1350 Certification by the Company’s Chief Financial Officer. (38)
97.1
-
Crown Crafts, Inc. Policy for the Recovery of Erroneously Awarded Compensation, Effective as of October 2, 2023. (37)
-
The following information from the Registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024, formatted as interactive data files in iXBRL (Inline eXtensible Business Reporting Language):
(i) Consolidated Statements of Income;
(ii) Consolidated Balance Sheets;
(iii) Consolidated Statements of Changes in Shareholders’ Equity;
(iv) Consolidated Statements of Cash Flows; and
(v) Notes to Consolidated Financial Statements.
Interactive Data File (embedded within the Inline XBRL and contained in Exhibit 101)
*
Management contract or a compensatory plan or arrangement.
(1)
Incorporated herein by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 28, 2003.
(2)
Incorporated herein by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended March 28, 2004.
(3)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated July 17, 2006.
(4)
Incorporated herein by reference to Registrant’s Registration Statement on Form S-8 dated August 24, 2006.
(5)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated November 9, 2007.
(6)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K/A dated November 7, 2008.
(7)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated July 6, 2009.
(8)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated March 8, 2010.
(9)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated May 27, 2010.
(10)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated August 9, 2011.
(11)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated March 27, 2012.
(12)
Incorporated herein by reference to Registrant’s Registration Statement on Form S-8 dated August 14, 2012.
(13)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated May 21, 2013.
(14)
Incorporated herein by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on June 27, 2014.
(15)
Incorporated herein by reference to Registrant’s Registration Statement on Form S-8 dated November 10, 2014.
(16)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated December 28, 2015.
(17)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated April 4, 2016.
(18)
Incorporated herein by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2016.
(19)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated August 7, 2017.
(20)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated December 18, 2017.
(21)
Incorporated herein by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2018.
(22)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated January 22, 2019.
(23)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated February 22, 2021.
(24)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated June 3, 2021.
(25)
Incorporated herein by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended March 28, 2021.
(26)
Incorporated herein by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on June 28, 2021.
(27)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated August 11, 2021.
(28)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K/A dated March 1, 2022.
(29)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated April 15, 2022.
(30)
Incorporated herein by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended April 3, 2022.
(31)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated March 20, 2023.
(32)
Incorporated herein by reference to Registrant’s Current Report on Form 8-K dated June 15, 2023.
(33)
Incorporated herein by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 1, 2023.
(34)
Incorporated herein by reference to Exhibit 2.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 1, 2023.
(35)
Incorporated herein by reference to Exhibit 2.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 1, 2023.
(36)
Incorporated herein by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended October 1, 2023.
(37)
Filed herewith.
(38)
Furnished herewith.