Q2 2021 Crown Crafts Inc Earnings Call

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[music].

Hello, Ladies and gentlemen, and welcome to the Crown Crafts incorporated investors conference call. Your host for today's call is Mr. Randall chestnut.

Ehrman, President and Chief Executive Officer.

At this time 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 Inc.

And as a reminder, this conference is being recorded today November 11 2020.

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.

Thank you.

Welcome to the Crown Crafts Investor Conference call for the second quarter fiscal 2021.

With me today is Randall chestnut, the company's president and Chief Executive Officer.

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Telephone replay of the call will be available one hour. After the end of the call. We four PM Central standard time on November 18, 2020 also a web replay of the call will be available for 90 days and can be accessed by visiting our website at www Dot Crown crafts dotcom.

Well, we've again I would like to remind listeners 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 and its history of paying dividends, we remind listeners 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 and thanks, everyone for joining today.

And we'll give a few comments Olivia will come back and add to it.

We said earlier, then well open it up for any questions that anyone may have Oh, [noise] I'm only going to address the quarter, which ended on September 20, Salvo from 2020, which were reported the earnings yes.

Yesterday afternoon after the market closed.

Net sales for <unk> was 2021, the current year were 21 million 659.

As opposed to the previous year at what 0.8 20, okay.

Oh, I think Bob 60, or an increase of three megawatt hour 99, our 16.7% and price.

Net income this year was 2 million 47.

As opposed to net income last year of 1 million 779, or an increase of $709000.

Our percentage of 39.8%.

Diluted earnings per share this year were 24 cents.

And last year, they were 18 cents.

Gross margin for the current year order.

<unk>, 32.8% of net sales.

From 31.6% in the prior year quarter.

You too.

Was a record quarter in terms of net income.

It was the best second quarter.

We posted since 2002.

It was also.

The best quarter, we posted anymore in over a decade.

A little over 10 years ago, we had one quarter.

Fourth quarter, they were slightly better but other than that it was suppose second fast.

All in all respects sensor order that we're very proud off we're very pleased with.

Sales for the quarter were primarily up due to strong sales so I don't know retailers.

And on a shelf much directly to consumers.

Demand for our products remain high during the COVID-19 pandemic.

Our product development teams are focused on developing products that.

Maybe the highest standard of our parents.

Which is which also led to higher sassy stack up sharply range stackers.

Being awarded Newsweek's bashed in spam 2021, all age groups, which is an award that were very pleased to be honored timber sales.

Turning to the balance sheet.

We finished the quarter with.

6.8 million of cash and no balance due on our revolving line of credit.

Late yesterday from where maybe announcement.

We announced that the company's board of directors had declared a cash dividend of the company's series a common stock.

25 cents per share a onetime dividend and a quarterly cash dividend of eight cents per share for total of 33 cents.

Both of these dividends will be paid on December 31st 2020.

To shareholders of record as of the close of business on December the level 2001.

The company's financial health and exceptional cash flow allows us to once again reward our shareholders with a return on their investment.

Payment of the special dividend and quarterly cash dividends.

<unk> West will have distributed more than 46 million and total dividends to shareholders since 2010.

We remain committed to delivering value by operating the business at this football matter.

Manner.

While continuing to invest in growth strategies.

We're pleased to finish this special dividend, which attached to the board's ongoing confidence in the future Crown Court.

[noise], Okay, I'll turn it over to Olivia.

Additional comments I'm.

I'm only going to give financial highlights for more detailed analysis. Please refer to the Companys form 10-Q filed with the Securities and Exchange Commission yesterday afternoon.

Net sales were 21.7 million for the second quarter of fiscal 2021, compared with 18.6 million for the second quarter of the prior year.

An increase of $3.1 million or 16.7%.

Net sales were 37.9 million for the first six months of fiscal 2021, compared with 34.5 million for the same period of the prior year anyway.

An increase of $3.4 million or 9.7%.

The increase in sales is due to higher sales rain at major retailers, which has been partially offset by declines at certain retailers that have been impacted by the 'cause it 19 Panda.

Particularly one customer that has remained closed throughout the entire six month period, if the current year.

Gross profit increased by 1.2 million, an increase from 31.6% of net sales for the prior year quarter to 32.8% of net sales for the current year for <unk>.

Gross profit increased by 1.7 million, an increase from 30.2% of net sales for the prior year six month period to 32% of net sales for the same period in the current year.

Increasing gross profit is due to the increase in net sales as well as a more favorable customer and product mix.

Marketing and administrative expenses increased by 326000, a decrease from 18.7% of net sales for the prior year quarter to 17.6% of net sales for the current year core.

Marketing and administrative expenses increased by 254000, but decreased from 20.1% of net sales for the prior year six month period, and 19% of net sales for the same period in the car.

The increase in amount for the current year to date period is primarily the result of higher outside services 201000, and higher advertising up 115000, partially offset by lower travel expenses $67.

The current year to date provision for income taxes is based upon an estimated annual effective tax rate from continuing operations of 24.2% compared to 24% and the profit.

During the prior year six month period, the company reversed the reserves for unrecognized tax liabilities that it had previously recorded for fiscal years 2011 through 2013.

Which resulted in the recognition of a discrete income tax benefit of 232000.

In addition, during both the current and prior year quarter. The company recorded discrete entries associated with excess tax benefits or charges arising from divesting of non vested stock during the period and also recorded reserves for unrecognized tax liability.

The effective tax rate from continuing operation combined with the effect of these discrete income tax charges and benefits resulted in an overall provision for income taxes of 24.9% for the current year to date period and 18.8% for the prior year.

Net income for the second quarter of fiscal 2021, with 2.5 million or 24 cents per diluted share net income for the second quarter of fiscal 2020, with 1.8 million or 18 cents per diluted share.

Net income for the first six months of fiscal 2021 was 3.7 million or 36 cents per diluted share compared to net income of 2.9 million or 28 cents per diluted share for the same period in fiscal 2020, which included three cents associated with the reversal of the discrete income tax benefit and the.

As he hated interest impact.

And I'll now return the call to Randall.

Yes, Thank you very much and Andrew you'll come back on.

Well open it up and then questions, which anyone like that.

We will now begin the question and answer session.

I ask a question you May press Star then one on your Touchtone phone.

If you are using a speakerphone please pick up your handset before pressing the keys.

If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then too.

At this time, we will pause momentarily to assemble the roster.

[noise] [noise] and the first question comes from Linda Bolton Weiser of D.A. Davidson. Please go ahead.

[noise] hi, congratulations on a great quarter, Oh, Hi, Linda Hi, So you know I was wondering if you could just give a little bit more color on the demand for your products, because I guess I'm used to having it rely more.

On birth rates and things like that but.

I mean do you have any insight into what what is going on I mean, our people just redoing their nurseries and buying things for their infants are what what color can you give us on the demand.

Well, I mean land or the man has to stay and went from hardware sales as demand for orders coming in and our Pos or sell through at the retailers and we track the major ones probably 80%.

All the retailers that Oh, 80% of the retail volume we try the POS has remained extremely Uh huh.

Well this entire period.

And.

We think that it's been helped.

Bob people stay at home, having more time to.

Shop, the Internet, which our internet businesses Oh.

And having more time on their hands, which is good.

And they're spending money.

We also think early on the stimulus checks held and that did help motion goods through.

But even beyond that Oh product has remained extremely strong and that's with for the lovingly referred to as one account, which has been totally zero for first and second quarter and it's so it's a sizable customer and we still overall.

Okay. So.

Oh, it's it's the demand has been very hot we're pleased with it.

Was there anything in the quarter that you could call out as unusual any shifting of sales from prior quarter or anything of that nature.

Linda no.

Not at all a there's nothing unusual that shifted from quarter to quarter.

Oh.

I used to say this is for getting more [laughter] and we're proud of him.

Right.

So can I just ask about your marketing and administrative expenses, if you exclude the advertising.

That crept up a little bit from 3 million to 3.4 million from the last quarter sequentially. So is that like a permanent new level or did you have some special cost that were in the quarter.

It's just it's normal expenses I mean, some of it may be a little bit of timing here or there, but for the most part other than advertising. It was just some outside services that is normal normal expenses.

Okay.

And yeah.

Yes. It is.

Give me nothing unusual no there was nothing unusual or extraordinary oh.

Okay.

And last quarter, you mentioned the gross margin was helped by certain retailer is being close to see how the lower margin channels. We're close but you still have really good gross margin expansion did those retailers some of those.

Yes, lower discount retailers did they reopen back up in the in the quarter.

They did some of them, they're not all of them and not all long term AFFO over degree.

So we'd like to stay on but there are still some improvement in our gross margin.

The fact that some of these people.

Normally buy with lesser gross margins have not had an opportunity to buy because the doors remain close but that's not a big degree.

Okay.

And then.

Finally, I guess on your your cash flows are obviously very strong.

Do you foresee keeping the little bit of debt that you have on the balance sheet for the remainder of the year or do you think you'll pay that off in the second half of the fiscal year.

That the debt that's on the books right now is the PPP loans, which we have now filed for forgiveness to request that forgiveness, but we have not heard back yet so that all depends on when we you know get word as to whether that forgiven and we need to either repay it or.

Maybe that off of the balance sheet into again.

Okay Gotcha.

Okay I guess, that's really all for now for me. Thank you very much.

Thank you and take care.

Again, if anyone would like to ask a question. Please press Star then one on your Touchtone phone.

This concludes our question and answer session I would like to turn the conference back over to Mr. Randall chestnut for any closing remarks.

Hi, Andrea Thank you very much.

And we appreciate everyone's a.

Today and interest in the company and.

In closing I'd like to say that management and the board remains optimistic about the future.

And as we have said many times.

On these conference calls and I'll say it again.

Your company remain solid.

Let me repeat that your company is solved.

We'd like to thank all of our employees suppliers customers and shareholders for their continued support and we look forward to speaking with you at the end of last quarter.

This concludes our presentation. Thank you very much have a good day.

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