Executives:.

Randall Chestnut - Chairman of the Board, President, Chief Executive Officer Olivia Elliott - Chief Financial Officer, Vice President Dave King - ROTH Capital Partners.

Hello, ladies and gentlemen and welcome to the Crown Crafts Incorporated investors' conference call. Your host for today's call is Mr. Randall Chestnut, Chairman, President and Chief Executive Officer. Currently, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

Any reproduction of this call, in whole or in part, is not permitted without prior written authorization from Crown Crafts Incorporated. And as a reminder, this conference is being recorded today, August 10, 2016. At this time, I would now like to turn the call over to Ms.

Olivia Elliott, Vice President and Chief Financial Officer, who will begin the call. Please go ahead..

Thank you. Good morning. And welcome to the Crown Crafts investor conference call for the first quarter of fiscal year 2017. With me today is Randall Chestnut, the company's President and Chief Executive Officer..

Good morning..

A telephone replay of this call will be available one hour after the end of the call through 8:00 A.M. Central Time on August 17, 2016. 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 dividends, 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..

Thank you Olivia and good morning again and thanks for joining us today. Yesterday afternoon, after the market close, we released the earnings for our first quarter FY2017 which ended July 3, 2016. And I will hit some of the highlights and Olivia will follow up with more details and as we said, we will give a chance at the end for questions.

Net sales for this year were $15.6 million as opposed to $17.9 million or a decline of $2.3 million or 12.6%. Net income for the quarter was $1.103 million as opposed to $927,000 last year or $176,000 or 19%. Diluted earnings per share increased were $0.11 a share and $0.9 last year.

The sales decline year-over-year can be attributed to several factors. A new modular at the major retailer was delayed until later in the year which affected the first quarter sales. In addition, a major retailer was overstocked due to large others that they had placed in and we had share in the fourth quarter of FY2016.

And last but not least, retail sell-through continued to be sluggish throughout the segment. We are pleased with our gross profit percentage for the first quarter which increased from 26.8% of net sales last year to 27.5% this year. The gross margin is held by lower cost from our suppliers as exchange rate improved in our favor.

In addition, we always maintain tight controls over internal cost. Looking at the balance sheet very briefly. We remain debt-free and we ended the quarter with a cash balance of $12.4 million, which is very strong. In addition to today's earnings release, we announced the 27th consecutive quarterly dividend.

We will pay $0.08 per share on October 7, 2016 to shareholders of record as of the close of business September 16, 2016. This represents a 3.2% annualized yield based on yesterday's closing price. Olivia, I give it back to you for some follow-up comments..

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

Net sales were $15.6 million for the first quarter of fiscal 2017, compared with $17.9 million for the first quarter of the prior year, a decrease of $2.3 million or 12.6%.

The sales decrease is primarily due to generally sluggish largest retail environment as well as lower replenishment related to the delay by a major retailer in the rollout of the new modular set to later in the year.

Also, sales to the major retailer were lower because they remained overstocked from a large order that shifted in the fourth quarter of the prior year. Gross profit for the first quarter decreased in amount by $494,000 but increased as a percentage of net sales from 26.8% to 27.5%.

The increase in gross margin percentage is primarily due to the company's overall tight cost control combined with improved product cost in China resulting from favorable exchange rate fluctuations. Marketing and administrative expenses decreased in amount from $3.3 million for the prior year quarter to $2.8 million for the current year quarter.

It decreased as a percentage of net sales from 18.3% to 18.2%. The decrease in amount is primarily related to lower overall compensation cost. The company's provision for income taxes is based upon an estimated annual effective tax rate from continuing operations for the current year of 37.3%.

The company elected to early adopt Accounting Standards Update Number 2016-09, effective as of April 4, 2016.

This resulted in the recognition of a discrete net income tax benefit of approximately $199,000 in the first quarter of the current year which reflects the effect of net excess tax benefit from the exercise of stock options and divesting of non-vested stock during the quarter.

This lowers the overall provision for income taxes to 26% for the current year quarter.

Although the company does not anticipate a material change to the effective tax rate from continuing operations for the balance of fiscal year 2017, several factors could impact the effective tax rate, including variations form the company's estimates of the amount and source of its pretax income and the amount of certain tax credits.

Net income for the first quarter of fiscal 2017 was $1.1 million or $0.11 per diluted share compared to net income of $927,000 or $0.09 per diluted share in the first quarter of fiscal 2016. I will now return the call to Randall..

Olivia, thank you again and Alison, if you will come back, we will open it up to any questions that anyone might have..

[Operator Instructions]. Our first question will come from Dave King of ROTH Capital Partners. Please go ahead..

Thanks. Good morning Randall and Olivia..

Good morning..

Good morning Dave..

I guess first off on the revenue.

Are you able to quantify the impact from of the delayed rollout of the modular display? And then when do you expect that display to actually rollout?.

Dave, we haven't quantified it, but it should rollout in the second quarter..

Okay. That's helpful.

And in terms of good current stocking levels at the retailer, which was due to over-ordering in the fourth quarter, have those orders resumed commensurate with the sell-through at this point? Or is there still little more to work through there?.

There's still a little bit more to work through. Because the POS at most major retailers has been down and has been depressed and is taking longer than normal to work through any inventory that they have..

Okay. And then in terms just environment in general, it sounds like that's sort of hasn't necessarily changed all that much our there..

It hasn't changed all that much. There is still a rough environment out there. The consumer is not spending the way we would like to see..

Yes. No, that's fair. And then maybe switching gears a bit on the gross margins.

I guess, how are you feeling about the pricing pressure you are getting from retailers? Are you having to pass along all the benefit you are getting from lower global supply costs? How should we be thinking about the puts and takes there? Are you still getting the improvement on supply costs? And then how much of that you have to pass on?.

Dave, we are still getting the improvement from supply cost, yes. And that is helping our gross profit, gross margin percentage. No question about it. And no, we are not passing all of it on to the retailers. But we are getting pressure from some of the retailers.

No question and we have been, as I said on the call last quarter, we are passing some of it on. There is no question about that. But we are keeping a fair portion too..

Okay..

At least for the moment..

Great. And hopefully, I am hopeful that that can continue. All right. That's good color. Thanks, Randall. And I will step back. Good luck for the rest of the year..

Thank you..

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

[Operator Instructions]. Ladies and gentlemen, as I am not showing any additional questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Randall Chestnut for any closing remarks..

Alison, thank you very much and thanks to everyone for joining us this morning on the investor conference call for our first quarter and we speak again in November for our second quarter.

But as we begin our year, we are excited and optimistic about the future in the face of the soft retail sell-through, as we always have we maintain tight controls over cost and we have continued to post strong earnings, which we are very pleased with.

We would like to thank all of our employees, suppliers, customers and shareholders for their continued support and interest in the company. And thank you and have a great day. This concludes our call. Thank you..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines..