Crown Crafts comes back with $2M profit
Staff -- Home Textiles Today, 6/24/2002 12:00:00 AM
GONZALES, CA —
Helped by a strong surge in gross margins, a slimmed-down and revamped Crown Crafts Inc., now tightly focused on the infant's products business, recorded a fourth-quarter profit of $2 million. It is a remarkable comeback, considering its year-ago loss was $45.4 million.
And for the first time in four years, the overhauled textiles producer, once one of the industry's highest fliers, made money for the entire year, before a one-time item, $2.0 million, compared with a loss the prior year of $73.6 million.
On paper, Crown Crafts managed to post a 12-month profit of $27.0 million but only because of a one-time gain of $25.0 million stemming from the forgiveness of debt as part of an earlier restructuring and refinancing of debt.
Wall Street and stock watchers clearly liked what they saw, and drove the company's battered stock sharply higher after the news came out. Crown Crafts stock, traded on the over-the-counter bulletin board, surged by 10 percent, or $0.06 a share, to $0.69 from $0.63 the day before. Crown Crafts stock has now almost tripled in value over the past 12 months, climbing by 176.0 percent from a 52-week low of $0.25 a share.
Reflecting the earlier sale of the woven products business and the spin-off of adult bedding as part of a sweeping make-over of operations, the down-sized company reported fourth-quarter sales of $23.7 million, down 40.9 percent from a year ago. For the entire fiscal year, which ended March 31, Crown Crafts sales totaled $117.6 million, down 52.5 percent from the prior year.
"We're delighted to report Crown Crafts' first annual profit since fiscal 1998," said Randall Chestnut, chairman, president and ceo, who took over the top spot from former ceo Michael Bernstein when Crown sold off its adult bedding business, now known as Design Works, to Bernstein last year. "This pivotal year marks the completion of our transition to a new, focused consumer products company concentrating on infant bedding, blankets, bibs and accessories, and on luxury hand-woven home decor."
In a major prop to the bottom line, average gross margin mounted a strong comeback, for the full year climbing to 22.0 percent from 7.5 percent the prior year. Expenses, for the full year, held relatively steady, inching up by just 20 basis points, to 17.7 percent of sales from 17.5 percent a year ago.
Given a big lift from widening margins, the company recorded an operating profit of $5.1 million, compared with a prior-year operating loss of $24.8 million.
The fiscal year just ended marked a turning point for Crown Crafts and a shift in direction, said Chestnut, involving the sale of the core woven products business to Mohawk Industries and the sale of adult bedding. "We moved our corporate headquarters to Gonzales, LA, restructured our debt and re-engineered our company into a smaller one that outsources most of our manufacturing."
With all that turmoil behind it, Crown, he said, is a stronger company than it has been for years and now a profitable company after years of punishing losses. "Virtually every financial ratio, including gross margins, inventory turns, current ratio, quick ratio and debt-to-equity made significant improvements over the last year," said Chestnut.
Crown Crafts Inc.
|12 mos. 3/31 (x000)||2002||2001||% CHG|
a-12-month results include a $25 million one-time gain resulting from the forgiveness of indebtedness as part of the company's earlier restructuring and refinancing of debt; 12-month results also include a $34,000 loss on the disposition of assets; and an income-tax benefit of $1.9 million, compared with a prior-year tax benefit of $23,000; the 12-month period for fiscal 2001 included a $28.2 million impairment provision and a $6.6 million loss on the disposition of assets.
|Oper. income (EBIT)||5,056||(24,769)||—|
|Per share (diluted)||1.37a||(8.55)||—|
|Average gross margin||22.0%||7.5%||—|
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