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. [Operator Instructions] Any reproduction of this call in whole or in part is not permitted without prior written authorization from Crown Crafts, Inc. As a reminder, this conference is being recorded today, August 14, 2019. And 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. Ms. Elliott, please go ahead.

Thank you. Welcome to the Crown Crafts investor conference call for the first quarter of fiscal 2020. With me today is Randall Chestnut, the Company’s President and Chief Executive Officer.

Good afternoon.

A telephone replay of the call will be available one hour after the end of the call through 4:00 p.m. Central Daylight Time on August 21, 2019. Also, a web replay of the 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 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, its history of paying dividends and the annualized yield on the Company’s common stock. 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 dividend. I will now turn the call over to Randall.

Olivia and Anita, thank you very much and welcome everyone to our first quarter FY 2020 investor conference call for the quarter that ended June 30 of 2019. Before the market opened this morning, we issued a press release outlining the quarter, and I’m going to touch on those, and Olivia will come back and add more to it before we open it up for questions at the end. For the quarter, net sales were $15.942 million as opposed to $15.460 million in the same quarter of FY 2019, an increase of $482,000 or 3.1%. Net income was $1.079 million as opposed to $264,000 in the same quarter last year or an increase of $815,000 or an increase of 309%. Diluted earnings per share were $0.11 a share as opposed to $0.03 in the same quarter last year. The gross profit in the current year quarter increased from 28.5% of net sales from 26.7% of net sales in the previous year quarter. Historically, our first quarter has been our weakest quarter; this year we are pleased that we had improvement in net sales as compared to the first quarter of last year. We are also very pleased with the improvement in gross margin, net income, and earnings per share. Current year net income was favorably impacted by $0.03 per diluted share due to a state income tax adjustment that Olivia will discuss in more detail a little later. During the quarter, we liquidated all remaining Babies R Us private label inventory that we have had since they filed for bankruptcy and liquidation. We are very pleased that we have been able to put this in the rearview mirror. The Company had a couple of years with the transition to naked crib and the loss of our second largest customer, which had a tremendous impact and uncertainty. We controlled our costs well during the storm and we came out on the other hand very healthy. Our staff did an amazing job getting through this very difficult period and we are pleased with the current results. We finished the quarter with a cash balance of $3.5 million and unused borrowing availability of $19.2 million. Our balance sheet remains very strong. Today in the announcement, the Company also announced that its Board of Directors declared a quarterly cash dividend on the Series A common stock of $0.08 per share, which will be paid on October 4, 2019, to shareholders of record at the close of business on September 13, 2019. This represents an annualized yield of 6.5% based on yesterday's closing stock price. We are very pleased to continue to reward our shareholders with cash dividends. That concludes my remarks, and I will give it back to Olivia to add any color.

Thank you. I’m only going to give financial highlights. For more detailed analysis, please refer to the Company’s Form 10-K filed with the Securities and Exchange Commission this morning. Net sales were $15.9 million for the first quarter of fiscal 2020, compared with $15.9 million for the first quarter of the prior year, an increase of $482,000 or 3.1%. The increase in sales is primarily due to higher overall replenishment orders with sales of bibs, toys, and disposables increasing by $1.3 million and sales of bedding and blankets decreasing by $880,000. Gross profit increased by $423,000, an increase from 26.7% of net sales in the prior year to 28.5% of net sales for the current year. The increase in amount is primarily due to the higher sales in the current year quarter. Marketing and administrative expenses decreased in amount by $233,000, a decrease from 23.8% of net sales in the prior year to 21.7% of net sales this year. The prior year quarter included $210,000 in expenses to transfer Sassy inventory from Grand Rapids, Michigan, to the Company’s distribution facility in Compton, California. The current year provision for income taxes is based upon an estimated annual effective tax rate from continuing operations of 24.3% compared to 24% in the prior year quarter. During the current year quarter, the Company reversed reserves for unrecognized tax liabilities that it had previously reported for fiscal years 2011 through 2013, which resulted in a recognition of a discrete income tax benefit of $232,000. In addition, during both the current and prior year quarters, the Company recorded discrete entries associated with excess tax benefits or charges arising from the divesting of non-vested stock during the period and also recorded reserves for unrecognized tax liability. The effective tax rate from continuing operations combined with the effect of these discrete income tax charges and benefits resulted in an overall provision for income taxes of 5% for the current year and 23.3% for the prior year. Net income for the first quarter of fiscal 2020 was $1.1 million or $0.11 per diluted share, which included $0.03 associated with the reversal of the discrete income tax benefit and the associated interest and penalty. Net income for the first quarter of fiscal 2019 was $264,000 or $0.03 per diluted share. And I will now give it back to Randall.

Olivia, thank you very much. Anita, if you come back home, you can open it up now for Q&A.

Thank you. [Operator Instructions] Our first question today comes from Josh Peters with Zenith Sterling Advisers. Please go ahead.

Hello, thank you for taking my call and congratulations on the rising increase in profit share year-over-year.

Thanks, Josh. How are you?

How are you?

Yes, good again. Did want to dig in just a little bit to the differences in the sales trends where the bib and toy business is up about 19% year-over-year, but bedding and blankets are down 9.5%. Can you just add a little color on what is driving the growth side and the continued decline on the bedding side?

I mean, Josh part of it is new placements and fixture fill, and we shipped some of that in the quarter, and that is really the majority of it. There is nothing spectacular that stands out in the quarter that calls us to have an increase of any appreciable degree except for just regular repeat business and some placements.

Okay. And the decline on the bedding side is that function of market conditions still taking a toll?

It is a combination of that and it is also a combination of one of our customers in the fourth quarter of last year took advantage and stocked up on quite a bit of inventory that carried over into the first quarter, which reduced the reorders in the first quarter. That probably had more of an effect on the crib and bedding business than anything else.

Okay. So it sounds like just normal variability, but still solid progress on profitability. One other question and then I will let somebody else get on the line. It is great to see that you paid off all debt and you're back in a positive cash position. But I notice that your receivable balances have come way down, is that what you think of as a normal level going forward from here or can we expect maybe the net cash position might run back down in the next couple of quarters?

Josh, that would be a forward-looking statement to predict where our cash will be, but I can tell you that yes it is going to bounce in and out of the revolver for the remainder of the year, but to no appreciable degree, no worry about it, okay.

Okay. thank you very much and again congratulations on a solid quarter.

Thank you very much, have a good day.

Thank you very much.

There appears to be no further questions. I would like to turn the conference back over to Randall Chestnut for any closing remarks.

Okay and Anita thank you very much and that concludes - well we got one more on that. Anita.

Next question comes from Ralph Marash with First Manhattan. Please go ahead.

Good afternoon. Thanks for letting me sneak in at the end there. Just two quick, the early orders, the fourth quarter order was that an attempt to beat tariffs, was that the reason?

Not really, it was a customer that - if I gave you the name obviously you would recognize him very well, but it was a customer that took advantage of just stocking up on some inventory at year-end, and the fourth quarter our fourth quarter, which ended in March, and there was nothing spectacular about it except that when they do that then it obviously has a negative effect on the following quarter. There is nothing unusual or spectacular about it. No, I don’t think it was related to the tariffs at all.

Okay, so then I will just expand the tariff question, are you seeing any kind of issues regarding tariffs either from customer concerns or in your own order pattern with your suppliers?

Well, to this point we have only had two of our categories of sizable degree that were affected, okay, and that was in round two, one in round two and one in round three. The round four that was announced to be effective September the first and now some of that has been postponed to December of 2019 is - the 10% is going to get most of the balance of our product. Our philosophy has been and we have repeated it over and over again is we are going to pass it on, we are going to raise the prices, and that we have done. We have had some pushback, but by and large most people understand and they are accepting it and passing it on and we are facing it through, meaning if we have got inventory in the warehouse at the pre-tariff rates we will work through that before we put the new tariffs in. We will work with the retailer in that form and fashion. But we have had a little bit of pushback, but by and large, most people have accepted it, but we have taken a pretty firm stand that we are going to pass it on.

Thank you and thanks for answering the other questions.

Thank you very much. Thanks for being on.

Thank you.

The next question comes from Fred Foulkes with Boston University. Please go ahead.

Hi, it is a great quarter; you really answered my questions on tariffs. So I was wondering with some of your larger customers, you are still been able to - they are willing to accept your passing on additional costs.

So far, Fred, they have okay. We had one item and it was an item that was sitting on the bubble anyway that may or may not have been continued and one sizable retailer just said okay, it is not performing that well, let's discontinue it. That has been the only case we have had where we have had just out-and-out resistance. We have had some people say, 'oh you got to give a six months' notice to pass through a price increase', and our answer to that is we didn’t get six months' notice on the tariffs, so sorry. We will work with you on the existing inventory, but we are passing it. And a lot of major retailers, in particular one, Walmart, has been very vocal that they are going to pass it on. And so it is inflationary, and there is no question about it. And we have taken a very firm stand and we are passing it on. Our margins, as you see, are healthy, but they are not healthy enough to absorb those kinds of increases.

Alright, thank you.

You are probably welcome. Thank you.

Thank you.

The next question comes from an unidentified analyst. Please go ahead.

Yes, good afternoon Randall and Olivia. Just a quick one for me. In previous calls you have actually called out the sales contributions from Sassy and Carousel, is that something you are willing to do on a continued basis?

We didn’t do that. The reason we had been doing that the last couple of years is because it was primarily differences between year-over-year, because you had it through a partial year in one year and then a full year in the other so it caused a major swing. So we really didn’t call those out specifically this year.

Okay just out of curiosity then where we saw bedding down on a year-over-year basis any commentary on how Carousel performed on a year-over-year basis, was it up, flat, down?

Denis, it was down a little, okay. It basically is in for bedding and it was too affected by the effects of a netted quail. So it was down slightly, yes.

Got it. Excellent, thank you. That is all for me, thanks a lot.

Thank you.

Welcome.

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

Okay thank you Anita, just the last closing remarks, as we begin another year we are very pleased and excited and optimistic about the future and I will emphasize your company is very solid. And I would like to repeat that your company is very solid. I would like to thank all our employees, suppliers, customers and shareholders for their continued support and we will speak to you again in three months or so. Thank you very much. Have a good day. Thank you.

This conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.