Randall Chestnut - Chairman, President and Chief Executive Officer Olivia Elliott - Vice President and Chief Financial Officer.

Dave King - ROTH Capital Partners Eric Beder - Wunderlich Securities Ralph Marash - First Manhattan Co..

Hello, ladies and gentlemen and welcome to the Crown Crafts, Inc. Investors Conference Call. Your host for today’s call is Mr. Randall Chestnut, Chairman, President and Chief Executive Officer. At this time, all participants are in a listen-only mode.

[Operator Instructions] Any reproduction of this call, in whole or in part, is not permitted without prior written authorization from Crown Crafts, Inc. And as a reminder, this conference is being recorded today, November 12, 2015. At this time, I would now like to turn the call over to Ms.

Olivia Elliott, Vice President and CFO who will begin the call. Please go ahead, ma’am..

Thank you. Welcome to the Crown Crafts investor conference call for the second quarter of fiscal 2016. With me today is Randall Chestnut, the company’s President and Chief Executive Officer..

Good afternoon..

A telephone replay of this call will be available 1 hour after the end of the call through 8:00 a.m. Central Time on November 19, 2015. Also, a web replay of this call will be available for 90 days and can be accessed by visiting our website at www.crowncrafts.com.

Before we begin, I would like to remind everyone of the cautionary language regarding forward-looking statements contained in the press release. That same language applies to comments made in today’s conference call.

Also, in regard to comments made in today’s conference call that are related to the company’s recently announced dividend, it’s history of paying dividends and the annualized yield on the company’s common stock, we would like to remind everyone that the declaration of each dividend is at the discretion of the company’s Board of Directors and the company expressly disclaims any assurances as to the frequency and amount of any future dividends.

I will now turn the call over to Randall..

Olivia, thank you and good afternoon again to everyone. Before the market opened earlier today, we released our earnings for the second quarter, which ended on September 27, 2015. And today’s remarks will be addressing the quarter that ended in September and also some year-to-date comments.

Net sales for the quarter for the three-month period were $20.7 million as opposed to $20.4 million in the same quarter of the prior year or an increase of $275,000 or 1.3%. Net income for the quarter was $1,565,000 as opposed to $830,000 or $735,000 increase from the same quarter last year.

This should be noted that Q2 FY ‘15 last year included a pre-tax charge of $1,054,000 and a net income effect of $657,000. This was for legal fees and settlement payments related to patent litigation that was reported in Q2 of last year. After adjusting for these changes, the year-over-year increase and net income were $78,000 or 5.2%.

Diluted earnings per share were $0.08 last year and $0.16 this year. Turning to the year-to-date, the year-to-date net sales were $38.6 million as opposed to $36.1 million in the same quarter last year or an increase of $2.4 million, or 6.7%.

Net income for the year-to-date six months were $2,492,000 as opposed to $1,533,000 or an increase of $959,000 year-over-year six months. Please note that the six months year-to-date FY ‘15 includes a pre-tax charge of $1.2 million and a net income effect of $748,000 related to the litigation I just mentioned.

After adjusting for these changes, the year-over-year increase in net income for the six-month period was $211,000 or 9.3%. Diluted earnings per share increased from $0.15 last year, six months, to $0.25 this year, six months. Again, repeating, net income for the quarter was up $1.3 million from the same quarter last year.

The prior year included initial shipments of programs that we gained after the demise of the competitor from the market. Even though we continue to sell these programs, we did not get the anniversary the initial shipments which we got last year for these programs.

We continue to be very pleased with our position in the market and we are pleased with the performance of the quarter. The balance sheet, we finished the quarter with no debt and a cash balance of $6.1 million.

Also earlier today, we announced that we declared a quarterly dividend of $0.08 per share payable on January 4, 2016 to shareholders of record as of the close of business on December 11, 2015. This $0.08 quarterly dividend represents a 3.8% annualized yield based on yesterday’s stock close. I will turn it back to Olivia for additional comments..

Thank you. I am only going to give financial highlights. For more detailed analysis, please refer to the company’s Form 10-Q filed with the Securities and Exchange Commission this morning.

Net sales increased by $275,000 or 1.3% for the three-month period ended September 27, 2015 and increased $2.4 million or 6.7% for the six-month period ended September 27, 2015 compared with the same periods in the prior year.

The sales increases are largely related to initial shipments of new collections as well as replenishment for ongoing programs. Gross profit decreased in amount by $140,000 and decreased from 28.6% of net sales for the three-month period ended September 28, 2014 to 27.5% of net sales for the three-month period ended September 27, 2015.

Gross profit increased in amount by $359,000 for the six-month period, but decreased from 28% of net sales for the six-month period ended September 28, 2014 to 27.2% for the six-month period ended September 27, 2015.

The decreases in gross margin as a percentage of net sales are a result of the assumption of new business from a former competitor with lower preset prices beginning in the three-month period ended December 28, 2014.

Legal expense for both the three-month and six-month periods of fiscal 2016 decreased as compared with the same periods of the prior year. Legal expense for the prior year quarter included a charge of $850,000 related to the settlement of litigation as well as legal fees of $204,000 incurred in connection with the settlement negotiation.

The prior year’s six-month period included the legal settlement and $350,000 in legal fees. Other marketing and administrative expenses decreased in amount by $328,000 for the three-month period and $71,000 for the six-month period ended September 27, 2015 compared with the same periods in the prior year.

The company’s provision for net income taxes is based upon an estimated annual effective tax rate of 39.5% for fiscal 2016 and 37.4% for fiscal 2015. Net income for the second quarter of fiscal 2016 was $1.6 million or $0.16 per diluted share compared to net income of $830,000 or $0.08 per diluted share in the second quarter of fiscal 2015.

Net income for the first six months of fiscal 2016 was $2.5 million or $0.25 per diluted share compared to net income of $1.5 million or $0.15 per diluted share for the first six months of fiscal 2015.

Last year’s second quarter net income was adversely impacted by after-tax legal fees of $127,000 and an after-tax payment of $530,000 associated with the previously mentioned lawsuit that was settled in fiscal 2015.

Excluding the impact of the legal fees and settlement payment, net income would have been 5.2% higher for the second quarter of fiscal 2016 as compared with the prior year quarter. For the first six months of fiscal 2015, after tax legal fees totaled $218,000.

Excluding the impact of the legal fees and the settlement payment, net income would have been 9.3% higher for the first six months of fiscal 2016 as compared with the same period for the prior year. I will now turn the call back to Randall..

Olivia, thank you very much. And Rocco, if you will come back and open it up to any questions that anyone may have..

Thank you, sir. [Operator Instructions] And our first question comes from Dave King of ROTH Capital Partners. Please go ahead..

Thanks. Good afternoon Randall and Olivia..

Thanks Dave..

Hi Dave..

How are you?.

Good.

So I guess first off, I appreciate the color in terms of understanding what happened in the year ago period in terms of getting those initial shipments in the bedding business and so it’s tough to anniversary those, I guess if I look back, it also looks like the December and March quarters also had pretty strong revenues in that segment and knowing Randall that you don’t necessarily want to give any guidance, I guess what’s the good way to think about those as we think about the back half of this year, were there some big initial shipments in those quarters as well or were those mostly replenishments that occurred as the year progressed last year, so will you have to anniversary any major shipments there?.

Dave, the third quarter in particular, which is the quarter we are in now, which ends in December, late December or early January also had some of the initial ships. They continued through quarter three..

Okay, so that helps there. And then just....

That’s the best guidance as I can give you..

I appreciate that.

I guess then just more broadly, without talking guidance, I guess is how are you feeling about the business out there these days, obviously there is a lot of information out there about when your big customers trying to clamp down suppliers and people in general on retail are just somewhat uncertain about the environment, I guess just what are your general thoughts these days, Randall?.

I mean, we feel Dave it’s the same as it’s been for many, many, many years. It continues to be a challenge. I mean as the retailers have their difficulties, they push back to some other suppliers and we have to be smart enough to figure how to handle that.

But it keeps life interesting and it keeps us honest and it keeps us trying to do the right thing and that’s exactly what we try to do. But I would say it’s not a lot, unlike previous years maybe a little more difficult, but not a lot more. And as I alluded to, we feel good about where we are in the market.

That’s what we have got to – that’s what we have to focus on is where we are in the market and are we doing the right things to be sure that we got our product in the market in the right position and that’s what we would strive to do..

Right. And it seems like that you are indeed having some success there. So that’s encouraging. And then maybe switching gears a bit on the expenses, even if I take out that big legal settlement charge last year, it looks like your core expenses were still down a fair bit, I think some of that is lower legal fees.

But at least versus my model, you guys are still coming in below that, so anything unusual there that’s driving the lower expenses or is that just continued focusing on it and how should we be thinking about the run rate?.

No. It’s just continued focus on that, I mean as you all know, you have been with us for a while. We watch every nickel and we try to be very conservative and very frugal in the way we operate and control the business. And we operate in good times just like it were bad times..

Okay, that helps. And then one more for me and I will step back.

In terms of the dividend, it looks like your cash balances are up a fair bit now, I think up $4 million or so I want to say year-on-year and $0.60 a share, have you got any thoughts by the Board you guys in terms of dividend outlook increasing that at some point or just what are you thinking about in terms of uses of that cash balance?.

And Dave, that’s why Olivia added to her disclaimer in the opening remarks that each week, we deal with the dividend on a quarter-by-quarter basis and we do. As a Board, as a company, we look at our cash balances, our needs for our cash, where we think we are going and we determine what’s the dividend is going to be.

And as you know we haven’t raised it in a while. But we have been paying a dividend now for five continuous years after we pay this next one. And so our track record has been good on that. But the answer I can give you is we look at that every quarter..

Great. Thanks for the color. Congrats on another good quarter and good luck for the rest of the year..

Thank you very much. Thanks..

And our next question comes from Eric Beder of Wunderlich Securities. Please go ahead..

Good afternoon. Congratulations on the quarter..

Hi Eric. Thank you very much..

Hi Eric..

Hi.

Could you talk a little bit about bib market a little what is going on there, do you see the potential for expansion in there may be something with the restaurant business there?.

The bibs Dave, is a little bit of confusion. The bibs really don’t go into the restaurant market. The product that goes into the restaurant market is the Neat Solutions tabletop disposable placemats. And that has, as you know has been a goal of ours for quite some time to expand the distribution on that.

When we bought the company that was one other reasons that attracted us so much was the capability of taking that into the restaurant tray. The economy turned bad, we had a recession and the casual dining restaurant business just got very difficult.

So we haven’t been able to expand that the way we would like to, but we are trying on a regular, constant, consistent basis and we have someone assigned, an account person, assigned to try and to expand that business. It’s our goal to do that..

Great.

In terms of the license business, are we seeing any new licenses start to crop up here and it’s something make sense for you guys to expand into in terms of that business?.

Well, the one license that recently that we announced, we announced a few months ago, and we showed the first product at the ABC trade show last month in October and in Las Vegas was Petunia Pickle Bottom.

And we did a higher end bedding collection under the license Petunia Pickle Bottom and there was a blog that came up after that ABC show, that a group put together independently and it was the top 10 must-have items on the ABC show. And the Petunia Pickle Bottom was one of those top 10 must-have items. So we are pretty pleased with that.

And it is a higher end product, no question about it. And – but it’s a beautiful product and one that we are very pleased with and that’s been the most recent ones..

What are you seeing in terms of the promotional cadence for your products, is it still very – I know it’s always aggressive, has it gotten worse, better or staying about the same here, what is the promotional landscape out there right now?.

I would say it’s no worse. It’s closely the same. I don’t think I have seen a big swing plus or minus in the promotional effects of our products..

Okay, alright. Congratulations again and thank you. Good luck in the holiday season..

Thank you very much Eric. Have a good day..

Thank you..

And our next question comes from Ralph Marash from First Manhattan Co. Please go ahead..

Good afternoon..

Hi Ralph..

Hi Ralph..

How are you?.

Okay.

As I look at that balance sheet, both your receivables and your inventories seem to be smaller than they have been in the last I will say, five quarters or six quarters, anything I can read into that?.

Not really, it’s timing more than anything else. I mean – and at the end of the quarter, it’s a snapshot of some moment in time and if you snapped it a few days earlier or a few days later it could have another swing. But to answer your question directly Ralph, no there is nothing you should read into that..

Okay, great, that was it. Thanks..

Thank you very much. Have a good day..

[Operator Instructions] I am showing no further questions. I would like to turn the call back over to Mr. Chestnut for any closing remarks..

Okay. Rocco, thank you very much. And thanks for everyone’s participation today. Your questions, your interest in the company and we are pleased with the – management is pleased with the results of the quarter, it was a good quarter and we maintain a very strong balance sheet and a very strong cash flow.

We would like to thank all of our customers, employees, suppliers and shareholders for their continued interest and support in the company. And we will talk to you again next quarter. Thank you very much and have a good afternoon..

And thank you, sir. Today’s conference has now concluded. And we thank you all for attending today’s presentation. You may now disconnect your lines..