Q1 2022 Crown Crafts Inc Earnings Call
This is the conference operator, I want to thank you for holding the Crown Crafts conference call will begin on just a minute and again. Thank you for holding the Crown Crafts conference call will begin and just a minute.
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Hello, Ladies and gentlemen, and welcome to the Crown Crafts incorporated Investor Conference call. Your host for today's call is Mr. Randall Chestnut, Chairman and Chief Executive Officer, joining Mr. Chesnut on the call will be Ms. Olivia Elliott, President and Chief Operating Officer, Mr. Craig Demarest, Vice President and Chief Financial Officer at this time all participants.
And are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time and he reproduction of this call and whole or and part is not permitted without prior written authorization from Crown Crafts, Inc. And as a reminder, this conference is being recorded today August 11.2021.
At this time I would now like to turn the call over to Mr. Craig Demarest, who will begin the call. Please go ahead.
Okay Alright.
Welcome to the Crown Crafts Investor Conference call for the first quarter of fiscal year 2022 with me today on Randall Chestnut, the company's Chief Executive Officer, and the Olivia Elliott, the company's President and Chief operating Officer.
A telephone replay of this call will be available one hour. After the end of the call through four PM Central time on November 11.
Also a web replay of this call will be available for 90 days and can be accessed by visiting our website at www Dot crown crafts Dot com.
Before we begin I would like to remind listeners of the cautionary language regarding forward looking statements contained in the press release that the same language applies the comments made in today's conference call.
I will now turn the call over to Ray.
Great. Thank you very much and good afternoon to everyone and thanks for joining us on our first quarter fiscal year 2022 conference call.
We're very happy with the results of the quarter.
One of our disappointment and May of this year, we announced that we had made the difficult decision to close the carousel designs and.
<unk> made the 21.2021.
The financial impact of care sale and the forgiveness of the paycheck protection loan during the quarter has caused the comparison between this year and last year to pay a little difficult.
But when you separate the impacts from the results of the outbreak continued operations.
No, Joe Baby and kids and Sassy baby.
The subsidiaries had a great quarter.
Now I'll give it to Olivier and Craig to discuss the quarter and more detail and we will be back at the end to take any questions. Thank you.
Thank you Randall.
I'm just kind of touch on the first quarter highlights of the very high level, and then I'm going to turn the call over to Craig and he'll go into more detail.
The first quarter net sales were $18.7 million compared with $16.2 million last year, which was an increase of $15 five per cent.
If you exclude carousel from both quarters and the increase and net sales per our continuing operations of know Joe and Sassy was 22, 9%.
While we've seen a shift and sales due to the consensus consumers starting to shop and brick and mortar locations again, if you exclude care sales direct to consumer sales.
Net base sales still represent approximately 30% of our sales.
During the quarter. We were also happy to have a slight increase and international sales, which were hard hit during the height of the pandemic.
First quarter net income was $2.7 million compared with $1.2 million last year.
As Randall mentioned, there were quite of few gains and losses associated with the carousel and the paycheck protection loan forgiveness.
And you exclude the impact of both of these net income would've been $1.5 million and the current year compared with $1.2 million last year and increase of $19 five per cent.
We continue to feel the impact of rising freight costs, which impacted our gross margin this quarter and Craig will address this and a little more detail later on and the call.
On the balance sheet side, we finished the quarter with $4.7 million and cash and no debt.
The company's board of directors declared and eight cents per share cash dividend on the Companys common stock that will be paid on October <unk> of 2021 to stockholders of record at the close of business on September 10.2021.
This represents of four 3% yield based on yesterday's closing price per share.
We're very pleased that our financial strength allows us to pay this dividend overall.
Overall this was the very good quarter for us and I'll now turn it over to Craig.
Thanks, ILUVIEN and.
I will give the financial highlights for a more detailed analysis. Please refer to the company's Form 10-Q filed with the SEC. This morning.
And the Olivia mentioned net sales were $18.7 million for the first quarter of fiscal 2022, compared with $16.2 million for the first quarter of the prior year on an increase of $2.5 million or 15, 5%.
The increase in sales is primarily due to the higher sales of bibs toys, and disposables and offset by lower sales of bedding and blankets.
The decline and sales of bedding and blankets is primarily the result of and $863000 decrease in sales and carousel of benign which ceased operations during the current year quarter.
Overall sales have been higher at brick and mortar of retailers and lower at online retailers as consumers have begun to return to stores that previously had been impacted by the COVID-19 pandemic.
Gross profit decreased by $367000 and decreased from 31% of net sales and the prior year quarter to 24, 9% of net sales and the current year quarter.
The gross profit dollars and the current year quarter decreased as compared to that at the same quarter and the prior year.
Because the gross loss of $647000 experienced by Carousel and the current year quarter was only partially offset by increased gross profit from higher net sales over the same comparable periods.
The loss from Carousel, and the current year quarter and is the result of the sale of inventory below cost and the recognition of charges of $344000 associated with the settlement with the supplier of a commitment to purchase fabric and $265000 associated with the liquidation of the care ourselves.
Remaining inventory upon the closure of the business.
The current quarter gross profit dollars and gross profit percentage are also adversely impacted by continuing increases in the cost of oceangoing freight.
Marketing and administrative expenses were flat at $3.4 million for both the current and prior year quarters, but decreased from 29% of net sales and the prior year quarter to 18% of net sales and the current year quarter and.
As compared with the prior year quarter.
And are you encouraged and the current year quarter higher overall compensation costs of $154000 and higher costs for outside of the services of $47000, which were offset by lower cost per carousel, including lower advertising costs of $149000 and the elimination of <unk>.
The $64000 and amortization costs.
Other items and the quarter include of 198.5 million gain from the forgiveness of the PPP loans that Olivier mentioned earlier.
The current quarter provision for income taxes is based upon an estimated annual effective tax rate from continuing operations of 19, 2% compared with 25, 1% and in the prior year quarter.
The current year quarter estimated annual effective tax rate includes no tax expense from the gain on extinguishment of debt, which will be permitted to be excluded from taxable income the effect of which is expected to lower the effective tax rate for fiscal year 2022.
And by approximately four percentage points.
During both the current and prior year quarters. The company recorded discrete tax benefits and our credits to adjusted reserves for unrecognized tax liabilities and the aggregate effect of excess tax benefits arising from the best thing of non vested stock and the exercise of the stock options.
And the effective tax rate from continuing operations combined with the effect of the discrete income tax items resulted in an overall provision for income taxes of 18, 6% for the current year quarter and 25, 9% for the prior year quarter.
Net income for the first quarter of fiscal 2022 was $2.7 million or 27 per diluted share compared to net income of $1.2 million or <unk> 12 per diluted share from the prior year quarter.
And with that I'll return the call back to Randall Okay. Great. Thank you very much and carry of I'll call you back up and you can open it up and any questions.
And in my head.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.
Your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
First question is from Linda Bolton Weiser of D. A Davidson. Please go ahead.
Yes, Hello, how are you doing.
Hey, Linda.
Hello.
Good good so yeah. Congratulations on the good sales in the quarter and I'm, just trying to figure out on the gross margin.
Could I ask you to repeat it sounds like there were two.
Special items that maybe I would want to exclude 344002 hundred 65000 is that correct. Since those were kind of special items.
Yes, the <unk>.
The carousel gross loss was $647000 and the current year quarter and it included the two items, you're referring to the $3.44, and the $2.65.
Okay.
So then if I exclude those items from gross margin.
I would get to some kind of normalized level.
And do you happen to know that off the top of your head of I guess I could do the calculation I'm just trying to figure out how much the gross margin was down excluding those items.
I don't know I don't have that handy.
And.
If you look at the the press release.
Uh huh.
The sale.
If you excluded both carrier and the carousel from both quarters as well as the PPP loan.
We included what net sales gross margin of our growth.
Gross margin and net income would have been.
So let me get to that the quarter would have had $18.1 million and sales net sales of.
29, 3% of the gross margin and one and a half million dollars as you are of net income.
If you exclude both of the the.
The growth one of.
Vince.
Okay.
Okay. So I guess that would make.
The gross margin down about you know like 200 basis points or so not quite.
So I mean from maybe a 29% gross margin I know you don't want to give guidance, but maybe that.
A decent level going forward, if one were to and assume the freight inflation pressures worth continue.
You've got to figure that out I'm on I'm, sorry, I think we got all weekend wear and knock on the help you with the Juno there.
Okay.
Alright.
Well are you and.
And you have talked about I believe from price increases on the last call. What's the status of taking some price increases.
Linda we are and the more we can and we analyze our business very carefully and word the items are price sensitive and we think that the price increase was going on.
Mike.
Knock it out of the market are too high.
We have avoided those other places we have been fairly consistent and insisting on price increases. So we have been we've had some success.
The one thing before you asked the question.
We have not been able to cover with.
With price increases as the freight costs because of the freight cost keeps changing faster than we can increase prices.
I mean, it almost changes every day.
So it's a it's a roller coaster.
Okay.
So.
In terms of on the carrier. So I think you said that.
The bedding and blankets segment was down 863000, and because of carousel of closing down.
The carousel was in there for about two months of the corridor.
So.
And just trying to figure out like the 863000 of sales loss is just for one month of the quarter. It seems very large.
Hold on.
The 853000 is the difference between last year and the junior right.
Including.
The months in the June quarter, this year, where care. So it was so.
So there were some sales.
And there were some sales and last year that we also did that math and the press release, where we took that is not what the impact of care of sell out of last year and compared it to the team.
And as Randall said in earlier in the call. It it's definitely a tough quarter to be able to compare so we tried to do what we could and the press release to make it a little bit clearer.
Okay.
Can you just remind me the full year amount of carousel sales.
And profit or something and in 2020.
I mean FY 'twenty one.
I will keep asking your questions and we'll look at and we'll refresh ourselves on that that number of why you're asking.
And then okay.
Loans.
Province.
And just the sales that's right.
We're giving you that momentum bundle.
Okay, I think it was around for somewhere in the area of four of $5 million of what I seem to have here.
That's that's closed I'm, just going to get the exact amount.
Okay.
And.
And so.
So your so in other words your sales increase.
It is even with the discontinuation of chair of sell through part of the quarter. So it's very strong what to what do you attribute the strength of the sales performance just generally people going back to the stores.
Well, yeah Linda people.
Even through the pandemic, we stayed apparel was strong.
We had.
Changed our business model, where we can service drop ship and share.
Shipments of direct to.
To the retailers to the internet retailers.
But then has the pandemic came to and then.
People wanted to get out of the house and go back to shop, and so we've seen a resurgence of heavy resurgence and brick and mortar so items and that has helped us okay and thats. The all not just one retailer, but through several of the retirement of.
And obviously that doesn't affect Amazon because they don't have of brick and mortar, but it doesn't affect our other retailers and that.
Yes.
And the strength that we've been able to regain a lot of that through people getting out and going back and for the person more of them.
Mhm.
Okay.
If you exclude.
And don't get me wrong, excluding the payroll protection program is just to clarify on numbers I mean were happy that we got forgiveness on that very pleased.
If you exclude carrier sale and then you have to exclude the payroll protection gain.
And exclude those as I've said and the opening remarks.
The strength of no joke baby and kids and firstly baby is very strong.
And we it was good and it was very good.
And okay.
And we've got we've said it many times before and that's with Boyd, one particular retailer debt.
As the specialty retailers that we sell of SaaS the those sales.
Place bench strength.
The <unk> had zero and the quarter.
And so you went over on overcoming that.
Hum.
Right what.
Why don't they of retail are going to come the come back the purchasing do you think.
Well we.
It's starting to come back a lot of it.
And when I say, a little bit very little button and.
Not at one end of the quarter, we just reported and that would be on the current quarter.
And that we're in now.
But I.
I think we've gotten.
A few words of.
But.
Yes.
Just start with the turbo vacuum.
Okay.
Yes.
So Linda just to follow up on the the.
The question about Carousel sales, we actually never had.
For the fiscal 'twenty, one sales, but in fiscal 'twenty of the sales were $4.8 million and it's safe to say that it wasn't far off from that number in 2021.
Maybe a little higher okay.
It's also we've never reported net income, but it's also safe to assume.
But if it were profitable.
And have.
And as the Chancellor closed the operation.
So you've got to assume it was not profitable.
Okay.
Hi, I think first of all the questions from me right now thank you very much and take care.
Thank you Elaine and thank you take care have a good day.
And again, if you have a question you can press Star then one.
And then one of you wish to ask a question.
Seeing no further questions I'll turn the call back over to Mr. Chestnut for any closing remarks I'm curious thank you very much and again I'd like to say, thanks to all who participated and.
Today's call.
And we repeat we're very happy with the results of the quarter.
And we want to thank everyone for their continued support and interest and the company we'd like to thank all of our employees suppliers and customers and we will talk to you again in mid November when we release, our second quarter results.
Thank you very much. This concludes our conference for today and have a good day.
Thank you. The conference has now concluded. Thank you all for attending today's presentation. You may now disconnect your lines have a great day.
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