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Crown posts 3Q $5.9M loss

ATLANTA -Weighed down by a $4.4 million pre-tax restructuring charge for shutting down manufacturing operations at its Roxboro, NC, facility, Crown Crafts Inc. posted a $5.9 million loss in its third fiscal quarter, compared with a prior-year deficit of $1.7 million.

But steering toward a turnaround after a radical restructuring and downsizing, the company posted a small operating profit of $194,000 as it shut down one business, sold off another, boosted margins, cut costs and paid down debt.

As it shut or sold off most of its manufacturing base to focus on the marketing of sourced products, Crown Crafts sales declined by 26.3 percent as part of a planned downsizing, to $67.1 million from $91.0 million last year. Triggering the shortfall in sales, Crown closed down manufacturing at its Roxboro, NC, cut-and-sew plant and sold off its $85 million woven products business to Mohawk Industries.

And steadily improving its operations, Crown Crafts boosted margins even given the big decline in sales and continued to hack away at costs. Average gross margin improved by 150 basis points, climbing to 17.5 percent from 16.0 percent a year ago.

Still cutting costs aggressively, Crown reduced its overhead a steep 16.4 percent during the quarter, to $11.5 million from $13.8 million last year, a cash savings of $2.3 million. For the nine months year to date, Crown has generated $4.9 million in cost savings.

Sounding bullish as he looks ahead, Michael Bernstein, ceo, said: "We expect that results in the coming quarters will continue to show improvement. With the actions taken, including significant cost reductions, outsourcing of manufacturing, sale of the wovens division and reduction of debt, Crown is now positioned to be profitable in two attractive segments of home fashions: infant products, including bedding, bath and bibs; and luxury adult bedding with the Calvin Klein and Royal Sateen brands."

Crown Crafts Inc.


Qtr. 12/31 (x000) 2000 1999 %CHG

Sales

$67,064

$91,001

-26.3

Oper. income (EBIT)

194

784

-75.3

Net income

(5,877)a

(1,667)a

-

Per share (diluted)

(0.68)

(0.19)

-

Average gross margin

17.5%

16.0%

-

SG & A expenses

17.2%

19.5%

-

Nine months

2000

1999

%CHG

Sales

207,433

240,950

-13.9

Oper. income (EBIT)

(7,836)

(1,923)

-

Net income

(28,140)b

(7,362)b

-

Per share (diluted)

(3.27)

(0.86)

-

Average gross margin

12.7%

15.4%

-


( ): Denotes loss

a-Third-quarter results include a $4.4 million impairment charge; miscellaneous income of $1.7 million, compared with $16,000 the prior year; a foreign currency loss of $5,000; and an income-tax benefit of $103,000, compared with $742,000 the previous year.

b-Nine-month results include an impairment charge of $4.4 million; a miscellaneous loss of $4.5 million vs. $211 in income the prior year; $26,000 in income from foreign currency exchange, compared with a $51,000 loss the previous year; and income-tax expense of $35,000, compared with a prior-year benefit of $4.0 million.

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