Crown Crafts Inc (CRWS)

CRWS: Movin'-on-up, to the East Side .... !!!

NICE DIVIDEND HERE. the high end baby and toy market will always thrive

Hard to tell what the new round of China tariffs will include, but my guess is that it will include a bunch of products that CRWS is importing. I really thought that Trump wouldn't do this round -- not given where he is in his term of office. Unless Trump gets reelected, the Chinese can just wait him out. And now he is going to piss off many additional voters... But I was wrong.

You are correct. Fingers crossed that between my spot-checking of the tariff list and the CEO saying a month later that the first 3 rounds hadn't really hit them, that there won't be some nasty surprise in earnings for the quarter.

Hope you're right. The Round 3 on your list hadn't impacted CRWS reported financials as of the last CC. So we'll see what they say on the next CC.

Here's what I thought was meant by rounds 1, 2, and 3:

Round 1: 25 percent tariffs on $50 billion worth of Chinese technology goods including machinery, semiconductors, autos, aircraft parts and intermediate electronics components imposed Summer 2018 as part of “Section 301” probe into China’s intellectual property practices

Round 2: 10 percent tariffs on $200 billion worth of Chinese goods including chemicals, building materials, furniture and some consumer electronics, imposed on Sept. 24, 2018, as a response to Chinese retaliation.

Round 3: Increase of the 10 percent Round 2 tariffs to 25 percent (done on May 10).

Round 4: Threatened application of 25 percent tariffs to all remaining Chinese exports to US. (Not yet done, and now less likely to occur.)

So, when the CEO was speaking in June 2019, I was thinking he had included the increase from 10 to 25 percent on the selected goods in what I've labelled Round 3.

Here's an article that uses the term "tranche" in the same way I (and I believe CEO Chesnut) have used "round": https://www.hugheshubbard.com/news/section-301-tariffs-increase-to-25-for-tranche-3-goods-from-china. Or, here are the tariffs by "list": https://ustr.gov/issue-areas/enforcement/section-301-investigations/search


Here's a NYTimes story on how one apparel company was bracing for what I've labelled as Round 4 (having dodged major impacts of rounds 1-3): https://www.nytimes.com/2019/06/05/business/media/tariffs-retail-clothes-everlane.html

Finally, I did some searching of the tariff lists. For instance, cotton bedding, not embroidered, not napped is on List 4 (which is the one that was just tabled).

Current tariffs not affecting them? I'd go back and listen to the conference call because that's not what I heard. Most of the company's products are sourced in China so there's definitely a negative impact. Only question is how much. The China tariffs got raised from 10% to 25% in early May...which will hit CRWS fiscal Q1 numbers. And the full impact won't be felt til Q2, so that quarter could be even worse. I think the market will remain nervous about how bad things might get here, but I could be wrong. Good luck.

I thought the CEO said that the current tariffs were not affecting CRWS, but that the expansion of tariffs to all Chinese exports was going to be a problem if they couldn't pass the costs along to retailers. Are you sure they are already getting hit?

[Update to message] I just went back to the conference call. CEO Chesnut said in referenncce to the possibility of a 25 percent tariff on the remainder of Chinese exports to the US:

We have had very minimal impact through rounds 1, 2 and 3 and we have passed those on to our customers.

The China tariff fears haven't been removed. There's just no new tariffs, which was widely expected. We still have yet to see how the tariff increases in early May will negatively impact the CRWS bottom line.

CRWS gets hammered over fears of China tariffs. Then it gets hammered when those fears are removed. It gets hammered over fears of recession. And it gets hammered as economy chugs along nicely.

In other words, I just bought some more.

If investors were afraid of Trump trashing CRWS with China tariffs, this stock should explode today. Fingers crossed.

Yield is now 7.3 percent.

Yield is 7.2 percent.

People are afraid Trump will expand tariffs. They aren't hitting CRWS yet, but expanding 25 percent tariffs to entire China trade would hurt.

I don't think Trump wants to tank the economy coming into the election.

I wonder if 50c per share is enough earnings to move this out of the $4 range?

Or perhaps only a 6% dividend is too low?

Sheesh! Should be trading over $8.

Double bottom breakout? Something's going on...

Huge earnings!!!!

I've been one of the main buyers the past few days. Glad I did so!

Apparently CRWS management feels good enough about the numbers they are going to report tomorrow that they are signing up for a conference to show the numbers off.

Nice! I might need to buy a bit more.

Bought them back a lot cheaper... CRWS crazy cheap.

Drat. I sold my shares in CRWS -- too soon.

CRWS posts pretty decent quarter, considering the many issues they face. Alas, I moved to the sidelines awhile ago and had not yet bought back in.

Let's see how the market likes the news.

Higher low for CRWS and now a higher high. Nice-looking chart here for a change.

Wow! CRWS just made an acquisition of an online retailer, essentially paying a price equal to earnings. Seems like a very good deal.

Someday the market will reward this stock with a higher multiple...

Hmmm. I'm guessing the folks getting those options would have preferred today's prices rather than the market price of a few days ago.

I think the selling is excessive. I'm going to hold my shares.

Very interesting development today. CRWS issued 40,000 options to insiders, with prices based on current market price. I wonder if they pushed those out in anticipation of the price shortly moving much higher.

Getting a good feeling about tomorrow's earnings.

And I like the responsible manner in which the options were issued. They give insiders just the right sort of incentives to work toward a stronger company and higher share price.

2 more days until CRWS announces earnings...

I took a starter position in CRWS this morning. Chart is strengthening.

does anyone know if the company finally got payment from its delinquent distributor?

Very interesting, rising, small cap value with no debt. Venturing into pet products - people just love to buy things for their pets!

Agreed...

this board is a ghost town. CRWS is hoarding cash but the stock volume is pitiful. i imagine the spread is ridiculous.

found via the recent stock buyback.

The earnings came out. It was as simple as that. There was nothing "spectacular" in the report so people took their gains and ran and it soon turned into a mini stampede.

I see Feb 14 was when the Q was published (8 am) and the stock down by almost $1.5-$2. Why? Does anybody know the answer.

It seems like they did pretty well for 3 quarters ended Dec 31, 2006. Churchill impairment is small issue. They had a gain from debt refinancing of $4mm which significanly boosted their earnings which is why they posted $0.69 per share but if you adjust for that still the earnisngs for 3 quarters ended dec 31, 2006 seems to be over $0.25 (well over same period for previous year). At a 20 times multiple that should be over $5! Is the multiple too high? I believe their full year EPS would be higher.
What am I missing? High stock option expense (doesn't seem like it)?

All: why did this stock come down from $6 to $4 on Feb 14, 2007. I see the latest Q results were posted before that.

On an earnings basis it is still cheap although I do expect it to take a breather soon.

You must have been very pleased. Great increases in profits and in tangible book value. I believe that the stock is even cheaper on a free cash flow valuation basis than on an earnings basis.

Not much action on this board, but I am looking forward to Wednewday. I'm guessing around $.17 EPS for the quarter from continuing operations and $.25 EPS for the net gain on restructuring. Any other projections?

And once again we print green for the day.

This stock reminds me of NTRI, just kept going and going.

Everytime I thought it would crash back to earth, I'd sell a block and a few days later it would catch fire and run again.

I'll be set if I can find a few of these a month.

Sold some CRWS today. The price is up. Starting this thread made me look at it more carefully. Got to take some profit.

It was a steal at an estimated 4x PE, but 7.5x just not the same.

I still hold about half what i bought though.

So, what do the financials look like? This week CRWS released their 10Q for the quarter ended June 30, prior to the debt refinancing.

First, company has nearly $30 million in book value, about $3 per share.

Total shareholders' equity 29,753 28,842
Note however that they also show goodwill of $22 million.

Earnings wise, they reported $2.1 million of operating income on $16.2 million of sales. Net income was $0.9 million, or $.10 eps. That looks like about a 7.5x PE on an annualized basis, now that the added dilution is no longer there.


July 2, July 3,
2006 2005

Net sales $ 16,164 $ 13,659
Cost of products sold 11,584 10,692

Gross profit 4,580 2,967
Marketing and administrative 2,450 2,468

Income from operations 2,130 499

Other income (expense):
Interest expense (723 ) (802 )
Other -- net 119 42

Income before income taxes 1,526 (261 )
Income tax expense 615 8

Net income (loss) $ 911 $ (269 )


Basic income (loss) per share $ 0.10 $ (0.03 )


Diluted income (loss) per share $ 0.04 $ (0.03 )


Weighted average shares outstanding -- basic 9,506 9,506


Weighted average shares outstanding -- diluted 22,137 9,506

So here's what happened:

CRWS has 9.5 milion shares outstanding. Until a month ago they had some old debt that had warrants associated with it to buy 22 million shares of common stock. That old debt went away, along with the warrants.

Because operations had improved since that old financing, the company was able to garner much better terms on their refinancing.

In summary, prior to the debt refinancing, the company showed 35mm shares outstanding. Subsequent to, only 10 million. EPS triples.


July 10, 2006 (1) July 11, 2006 (2)
----------------- -----------------

Outstanding Common Shares 9,505,937 9,505,937

Common Shares Issuable upon
Exercise of Warrants 22,345,536 -

Shares Issuable to Management
upon Exercise of Warrants 3,550,000 -

Stock Options Outstanding 536,100 536,100
---------- -----------
35,937,573 (3) 10,042,037

Crown Crafts, Inc. Announces Debt Refinancing and Extinguishment of Lender Warrants and Certain Contingently Issuable Shares
Tuesday July 11, 5:35 pm ET

GONZALES, La., July 11, 2006 (PRIMEZONE) -- Crown Crafts, Inc. (``Crown Crafts'' or the ``Company'') (OTC BB:CRWS.OB - News) today announced that it has completed a successful refinancing of its corporate credit facilities. The new financing package, secured through CIT Group/Commercial Services, Inc., substantially reduces the Company's total debt and its cost of funds and, importantly, extinguishes all of the warrants that were exercisable by its lenders and certain shares that were issuable to management upon the exercise of such warrants, which together represented more than 70 percent of the Company's equity.

``We are very pleased to announce this refinancing as part of what has been an incredible turnaround since 2001. Crown Crafts continues to make meaningful progress toward creating long-term value for its stockholders, and this new facility provides a key financial building block in that process,'' said E. Randall Chestnut, Chairman, President and CEO. ``This transaction returns a significant portion of the Company's equity to our stockholders and clearly demonstrates Crown Crafts is again ready to grow based on its proven strengths in infant products. We've posted a solid track record of profitability for five consecutive years. All of these successes were achieved while aggressively paying down the Company's debt and making significant changes in our operations required by an evolving marketplace.''

With today's announcement, Crown Crafts will have 9.5 million shares issued, 500,000 shares issuable upon the exercise of stock options and $12.6 million in debt. Immediately subsequent to the July 2001 restructuring, the Company had approximately 36 million shares issued or issuable and $48 million in debt. See the tables below for the Company's capital and debt structure immediately before and after the refinancing.

The CIT facility allows the Company to borrow up to $22 million on a three-year revolving line of credit secured by accounts receivable, inventory and fixed assets at a favorable interest rate of 1% below prime. The $16 million debt which was retired with this new loan had an effective rate of 11.65%. In connection with the refinancing, non-interest bearing subordinated indebtedness was reduced from $8 million to $4 million, payable in two non-interest bearing installments of $2 million each in July 2010 and July 2011. The $8 million debt was carried on the Company's books net of an unamortized discount of $1 million immediately before the refinancing. The new $4 million debt will initially be recorded net of an original issue discount of $1.1 million. The Company expects to record an approximate pre-tax gain of $4.0 million on the subordinated debt reduction. After the refinancing, current debt under the new agreement will be approximately $12.6 million compared to $23.9 million at the end of fiscal 2006.

Below are two tables showing the capital and debt structure of the Company immediately before and after the refinancing.


Issued and Issuable Shares Immediately Before
and After the Refinancing


July 10, 2006 (1) July 11, 2006 (2)
----------------- -----------------

Outstanding Common Shares 9,505,937 9,505,937

Common Shares Issuable upon
Exercise of Warrants 22,345,536 -

Shares Issuable to Management
upon Exercise of Warrants 3,550,000 -

Stock Options Outstanding 536,100 536,100
---------- -----------
35,937,573 (3) 10,042,037
========== ============



Debt Outstanding Immediately Before and After the Refinancing

July 10, 2006 (1) July 11, 2006 (2)
------------------- --------------------
Loan Type Outstanding Effective Outstanding Effective
Balance Interest Balance (4) Interest
Rate Rate

Revolver $ - Prime 9,700,000 Prime
plus 1% less 1%

Interest Bearing
Subordinated Debt 16,000,000 11.65% - N/A

Non-interest Bearing
Subordinated Debt 8,000,000 0.00% 4,000,000 0.00%

Original Issue
Discount (970,699) N/A (1,076,392) N/A

PIK Notes (5) 1,330,267 0.00% - N/A
---------- ----------
Total $ 24,359,568 $ 12,623,608
=========== ============

(1) Immediately before refinancing.
(2) Immediately after refinancing.
(3) In calculating diluted earnings per share for financial reporting
purposes, the Company historically assumed that the proceeds from
the exercise of all outstanding warrants and options would be
used to repurchase shares on the open market. Accordingly,
rather than reporting 35.9 million fully diluted shares, the
Company reported 21.7 million fully diluted shares at the end
of fiscal 2006 for financial reporting purposes.
(4) Internally generated cash of $7.8 million was used to pay down
a portion of the retired debt.
(5) Includes $253,000 accrued interest to be converted to long-term
debt.

``We are very pleased with the CIT financing package and the tremendous progress we have made in the past five years,'' said Chestnut. ``With this refinancing of our debt, we have achieved several important benefits for our stockholders. We have reduced our overall debt by more than 70 percent since our restructuring in 2001, substantially reduced our interest expense going forward and right-sized the capital structure of the Company. The overhang of the warrants has been a primary concern of our stockholders and investors. This transaction not only allows us to eliminate the overhang, but to do so on extremely favorable terms that provide maximum benefit to our stockholders.''

Chestnut continued, ``Following last month's announcement of a 57% increase in pre-tax net income, this event further transforms our Company and is a clear confirmation by the lending community of our renewed financial strength. Since 2001, we have stabilized our business, have adjusted to significant changes in production, sourcing, importing and direct-to-retail supplying and have actually improved profitability both as a percentage of revenues and in absolute terms. We have achieved these remarkable results through a clear and dedicated focus on our core business, a disciplined approach to execution, and efficient management of all parts of our operations. Crown Crafts is today a lean, efficient and responsive business able to meet the demands and needs of our customers. We believe that we are now poised to grow and expand our business, and we look forward with excitement to the opportunities we are now positioned to embrace.''

The Company will host a teleconference on Thursday, July 13, 2006 at 10:00 a.m. Central Daylight Time to discuss the refinancing and answer appropriate questions from stockholders. Interested investors may join the teleconference by dialing (866) 269-9608. Please refer to confirmation number 835994. The teleconference can also be accessed in listen-only mode by visiting the Company's website at http://www.crowncrafts.com. The financial information to be discussed during the teleconference may be found prior to the call on the investor relations portion of the Company's website.

A telephone replay of the teleconference will be available from 11:45 p.m. Central Daylight Time on July 13, 2006 through 11:59 p.m. Central Daylight Time on July 20, 2006. To access the replay, dial (800) 475-6701 in the United States or (320) 365-3844 from international locations. The access code for the replay is 835994.