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Edited Transcript of CRWS earnings conference call or presentation 10-Jun-20 6:00pm GMT

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Q4 2020 Crown Crafts Inc Earnings Call Gonzales Jul 2, 2020 (Thomson StreetEvents) -- Edited Transcript of Crown Crafts Inc earnings conference call or presentation Wednesday, June 10, 2020 at 6:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * E. Randall Chestnut Crown Crafts, Inc. - Chairman, CEO & President * Olivia W. Elliott Crown Crafts, Inc. - VP, CFO & Secretary ================================================================================ Conference Call Participants ================================================================================ * Dennis J. Scannell Rutabaga Capital Management LLC - Principal & Portfolio Manager * John Eric Deysher Bertolet Capital Trust - Pinnacle Value Fund - Portfolio Manager * Linda Ann Bolton-Weiser D.A. Davidson & Co., Research Division - Senior Research Analyst * Ralph P. Marash First Manhattan Co. - MD & Portfolio Manager * Spencer Kinkelaar ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Hello, ladies and gentlemen, and welcome to the Crown Crafts, Inc. 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, June 10, 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. -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [2] -------------------------------------------------------------------------------- Thank you. Welcome to the Crown Crafts Investor Conference Call for the Fourth Quarter and Full Fiscal Year 2020. With me today is Randall Chestnut, the company's President and Chief Executive Officer. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [3] -------------------------------------------------------------------------------- Good afternoon. -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [4] -------------------------------------------------------------------------------- A telephone replay of this call will be available 1 hour after the end of the call through 4:00 p.m. Central time on June 17, 2020. 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. I will now turn the call over to Randall. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [5] -------------------------------------------------------------------------------- Olivia, thank you. Good afternoon again to everyone. We appreciate your attendance today. We -- before the market opened this morning, we released earnings for our fourth quarter and full year for our fiscal 2020, and we'll hit on some of those numbers. Olivia will add more to it, and then we'll open it up to any questions anyone may have on the line. Net sales for the fourth quarter of this year, FY '20 was $20.307 million as opposed to the previous year same quarter of $21.717 million or down $1.410 million or 6.5%. Net income for the year was $1.608 million -- excuse me, I'm sorry, for the quarter, $1.608 million versus $1.392 million in the same quarter last year or an increase of $216,000 or 15.5%. For the quarter, the fourth quarter diluted earnings per share were $0.16 this year and $0.14 last year. If you flip to the fiscal year, the net sales were $73.396 million as opposed to the prior year of $76.381 million, a reduction of $2.985 million or 3.9%. Net income for the year was $6.561 million as opposed to $5.019 million in the previous year or a decrease of $1.542 million -- excuse me, an increase of $1.542 million or 30.7% increase. The diluted earnings per share were $0.50 last year and $0.65 in 2020. We finished 2020 with very strong performance. During the quarter, we had some favorable reversal of income tax reserves, and Olivia will address those in more detail a little bit later in the call. We're pleased with the results that we were able to achieve. One point to note is, during the year, our Internet business, both direct and through Internet retailers grew nicely to over 1/3 of our gross sales. We expect this trend to continue in the future. Several years ago, we set up our warehouse to drop ship our product to consumers on behalf of certain of our retail customers, and this has been great for the company. While we've been focused nearly exclusively on the coronavirus, in recent months, most of you will recall, one of the biggest challenges for the company during the year was increased duties or the constant threat of increased duties on our products imported from and manufactured in China. In each case, we were able to react quickly to offset the increased cost with the combination of price increases to our customers and cost concessions from our suppliers. These efforts resulted in a slight improvement in gross margin as a percent of net sales for fiscal 2020 as opposed to fiscal 2019. We're very pleased with the effort of our staff to position the company for the future. Turning to dividends. The Board of Directors has decided not to declare a dividend -- not to declare the quarterly dividend that would otherwise have been scheduled to be paid in July. With the uncertain times we're experiencing because of the coronavirus, the Board felt that it was best to conserve cash at this time. We're confident that our shareholders will agree with this temporary suspension of dividend, we believe that we can and will resume paying dividends in the near future. Our country and the world has been fighting the coronavirus for the past few months. We have never experienced anything of this magnitude. As calendar 2019 came to a close, we had ramped up our inventories in anticipation of expected tariff increases and the usual shutdown in China for the Lunar New Year. This successfully prepared us for the minor disruptions in the flow of our product from China due to the coronavirus. In nearly all cases, we were able to timely fill our customer orders from existing inventory. Additionally, our manufacturers in Asia have returned to near 100% of pre-coronavirus production levels. In an effort to address the uncertainty surrounding the economic conditions and support the continued support of our operations, we did apply for and received the loan under the Paycheck Protection Program. We have been able to remain open for shipping and production at our Compton, California and Douglasville, Georgia facilities. In other locations, we had most of our employees working remotely for approximately 2 months. While this presented a few minor difficulties for the most part, it has been successful. Nearly all of our employees have now returned to normal locations and schedules. Olivia, I'll turn it back over to you for more comments. -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [6] -------------------------------------------------------------------------------- I'm only going to give financial highlights. For more details, please refer to the company's Form 10-K filed with the Securities and Exchange Commission this morning. Net sales were $20.3 million for the fourth quarter of fiscal 2020, down $1.4 million or 6.5% from prior year sales of $21.7 million. For the year, net sales were $73.4 million for fiscal 2020, down $3 million or 3.9% from $76.4 million in the prior year. The decrease in sales for the year is primarily due to timing of shipments with certain retailers as well as a program that was discontinued during the second quarter of fiscal 2020. Gross profit decreased by $862,000 and was 26.3% of net sales for the current year quarter compared with the prior year quarter gross profit of 28.6% of net sales. Gross profit decreased by $717,000 but increased from 29.2% of net sales for fiscal 2019 to 29.4% of net sales for the current year. Marketing and administrative expenses decreased by $1.3 million for fiscal 2020 compared with fiscal 2019. Current year compensation costs were $525,000 lower than prior year, while outside services and advertising costs were $284,000 and $122,000 lower, respectively. Prior year included $210,000 in costs associated with transferring most of the 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% compared with 24.4% in the prior year. During the current year, the company reversed the reserves for unrecognized tax liabilities that it had previously recorded for fiscal years 2011 through 2013 and 2015, which resulted in the recognition of a discrete income tax benefit of $444,000. Also in the current year, the company recorded a discrete income tax benefit of $274,000 to reflect the aggregate effect of certain tax credits. In addition, during both the current and prior year, the company recorded discrete entries associated with excess tax benefits or charges arising from the vesting of nonvested stock during the period and also recorded reserves for unrecognized tax liabilities. 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 15.5% for the current year and 26.1% for the prior year. Net income for the fourth quarter of fiscal 2020 was $1.6 million or $0.16 per diluted share compared with net income of $1.4 million or $0.14 per diluted share in the fourth quarter of fiscal 2019. Net income for fiscal 2020 was $6.6 million or $0.65 per diluted share compared with net income of $5 million or $0.50 per diluted share for fiscal 2019. And I'll now return the call to Randall. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [7] -------------------------------------------------------------------------------- Olivia, thank you very much. And Andrea, we'll bring you back in, and we'll open it up to any questions anyone may have on the line. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And our first question will come from Linda Bolton-Weiser of D.A. Davidson. -------------------------------------------------------------------------------- Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [2] -------------------------------------------------------------------------------- So my first question has to do with just the current trends of what you're seeing. I know you don't want to give guidance, but is there any way that you could talk about what you're seeing for April and May? Just to give us a sense for how to think about the first half of the next fiscal year? I mean you said that e-commerce is now about 1/3 of your business. So does that mean you're holding up pretty well given the retail store closures? Or can you just give us a little color on what you're seeing? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [3] -------------------------------------------------------------------------------- Linda, I'll try to help you a little bit, but let me first say, we don't give guidance. You know that, okay? The downturn has not been as severe as what we had expected, okay? We have been able to ship all the way through. As we said, we kept our warehouse open, and we kept our facility open in Douglasville, Georgia. So we've been operationally at those 2 facilities all the way through. And the sales have not deteriorated as we had expected they would. They've held up pretty good. And that's the best I can give you. -------------------------------------------------------------------------------- Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [4] -------------------------------------------------------------------------------- Okay. Do you think there's any -- I'm just trying to think about consumer behavior toward your products. I mean it does depend largely on birth rate, but do you think there's some sort of something with demand going on because there is more of a stay-at-home situation right now, people trying to make the home more comfortable for the infant? Or is there anything like that, that you're picking up on? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [5] -------------------------------------------------------------------------------- We believe, Linda, that with the people staying at home and with the stimulus checks that they receive that we've seen such a bump in Internet sales either through other customers that we drop ship for or through our own Internet sales have been stronger. So we do believe that consumers are staying home and they're more interested in shopping from home and they're placing orders. So we think that's had a bump up. -------------------------------------------------------------------------------- Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [6] -------------------------------------------------------------------------------- Okay. Also, your margin expansion was pretty good for the year. I think it was up about 90 basis points on an adjusted basis to 10.5%, and you talked about some of the reasons for that. Do you think that sometime in the future in the out years, you can get back to your prior peak of 13% operating margin, is that something that's feasible? Or is your business way different now than it was a few years ago? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [7] -------------------------------------------------------------------------------- Again, that's -- Linda, that's a little bit forward looking. So we're confident with the company where we stand, the results that we've posted and where we're at for the future. That we feel very comfortable with. We never expected anything of this magnitude with the coronavirus, never. So that came out of left field, and we had to adjust going forward, and we did on a daily basis. -------------------------------------------------------------------------------- Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [8] -------------------------------------------------------------------------------- Okay. And then let's see. I haven't examined your whole cash flows and everything, but it does look like you have a bit of debt on your balance sheet. Did you draw down on your revolver in the fourth quarter? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [9] -------------------------------------------------------------------------------- We did. We pulled down a little bit. I don't know exactly what it was. Olivia is looking it up, but we had $2 million and change, I think. -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [10] -------------------------------------------------------------------------------- $2.6 million -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [11] -------------------------------------------------------------------------------- $2.6 million pull down on the revolver at year-end. -------------------------------------------------------------------------------- Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [12] -------------------------------------------------------------------------------- So you'll just keep -- you'll just sort of keep that cash on the balance sheet as a buffer as we go through the crisis here? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [13] -------------------------------------------------------------------------------- The cash, I mean we didn't have any cash. We had a slight revolver. -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [14] -------------------------------------------------------------------------------- We had a small amount. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [15] -------------------------------------------------------------------------------- We had a small amount of cash, but that's just a matter of timing when it's one account versus another one. But we intend to go through the next few months, conserving cash, which we do and we do very well with. So that was a moment in time when we had $2.6 million at year-end. And I think we had a cash balance of $200,000 or something. -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [16] -------------------------------------------------------------------------------- $280,000. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [17] -------------------------------------------------------------------------------- $280,000. So that was just a minor blip on the radar of whether it's in one account versus another account. It was not intentional. -------------------------------------------------------------------------------- Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [18] -------------------------------------------------------------------------------- And how much is left in your revolver that's accessible? -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [19] -------------------------------------------------------------------------------- As of year-end, it was $20.1 million. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [20] -------------------------------------------------------------------------------- That was after the $2.6 million that we'd already drawn down on. -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [21] -------------------------------------------------------------------------------- It was an additional amount of... -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [22] -------------------------------------------------------------------------------- Yes, that was additional revolver, Linda, that we could have drawn on. -------------------------------------------------------------------------------- Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [23] -------------------------------------------------------------------------------- Right. And then finally, your gross margin in the quarter, I mean, although for the year, it was pretty good. For the quarter, it was down year-over-year and it was a little worse than we expected. Was that just product mix? Or was there anything particular in the gross margin in the fourth quarter? -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [24] -------------------------------------------------------------------------------- Linda, we always experience -- we've talked about this in the past. We have an overhead variance. So it's the timing of when we have purchases when we add the inventory. So sometimes Chinese New Year, for example, when we're not getting any purchases in, that causes overhead variance to be a little bit lower or unfavorable. So from year-to-year, we always say the quarters are not exactly easy to forecast, but on an annual basis, you should be able to look at it that, that's consistent. -------------------------------------------------------------------------------- Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [25] -------------------------------------------------------------------------------- Okay. And then on the dividend, as soon as you see that things are back to a normalized situation, you'll consider resuming the dividend, is that correct? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [26] -------------------------------------------------------------------------------- Well, as we said, we've classified this, and I said in my remarks, a temporary suspension of dividend. And we've always said and we still say that dividends are declared by the Board quarter by quarter by quarter, so -- but we do classify this one as a temporary suspension. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Our next question comes from Spencer Kinkelaar of Ardent Capital Management. -------------------------------------------------------------------------------- Spencer Kinkelaar, [28] -------------------------------------------------------------------------------- You guys touched on pretty much all of my questions, except I still have one here at the bottom of my page. Just in terms of like -- I understand you're being conservative at the moment with -- it seems like the dividend cut was more out precaution than any like financial distress. But I also know that these tough environments can sometimes mean opportunities. Are you guys thinking about any like opportunistic M&A or anything like that at all? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [29] -------------------------------------------------------------------------------- Again, I mean, that would be -- Spencer, that would definitely be forward looking, and I can't address that. -------------------------------------------------------------------------------- Spencer Kinkelaar, [30] -------------------------------------------------------------------------------- Okay. I guess if I could just -- and then even with like where your stock is at now, could you maybe put that revolver to work and do a little bit of buybacks or anything like that? Have you thought about that at all? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [31] -------------------------------------------------------------------------------- Well, I mean, again, right now, with the uncertainty in the clouds that are floating around in the world, we're not running out and spending money, doing buybacks, dividends, et cetera. We're sort of taking a wait-and-see approach, and we're holding on to the cash to be sure we've got plenty of coverage. And we honestly believe that is the right thing to be doing right now. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- Our next question comes from John Deysher of Pinnacle. -------------------------------------------------------------------------------- John Eric Deysher, Bertolet Capital Trust - Pinnacle Value Fund - Portfolio Manager [33] -------------------------------------------------------------------------------- I was just curious, back to the M&A question. Obviously, you're not going to talk a lot about what you might be doing. But could you just remind us what the nature of your business is in terms of competitive landscape? Are there -- is it a fragmented landscape with lots of small players? Is it a landscape with a couple of giants? Remind us again, what that business looks like for both bedding and your core product lines. Just a snapshot of what the overall industry looks like would be appreciated. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [34] -------------------------------------------------------------------------------- John, yes, I'll be happy to do that. Our business consists of a lot of small players, no majors at all. In fact, we would probably be considered the major in most of the categories we're in because we have such dominant market share in almost every category we're in. So it's made up of a lot of small companies. None of them that you would know. None of them public. They're all private. And so it's -- before the trade shows were interrupted by the coronavirus, you go to a trade show and there'll be 600 exhibitors. And yes -- and that's sort of representative of the landscape. There's that many different people that are competitors in some form or fashion. Not all in the same area we're in, but yet the same dollars for the baby. So it's a very scattered landscape. -------------------------------------------------------------------------------- John Eric Deysher, Bertolet Capital Trust - Pinnacle Value Fund - Portfolio Manager [35] -------------------------------------------------------------------------------- Okay. What allows that landscape to persist? Do each of those 600 players offer something unique and different to the customer? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [36] -------------------------------------------------------------------------------- Well, some of them have very small niches and a lot of them are niche players. There's probably a dozen to maybe 2 dozen larger companies, and we would fall into that category. And then beyond the 2 dozen, they drop down very, very small. And a lot of them will be just one product. And they dreamed up and invented some unique product for the baby and the family that's helpful. And so that's sort of -- it's very much of an entrepreneurial business. -------------------------------------------------------------------------------- John Eric Deysher, Bertolet Capital Trust - Pinnacle Value Fund - Portfolio Manager [37] -------------------------------------------------------------------------------- Okay. And you mentioned trade show. What is the big trade show that everybody goes to in your industry? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [38] -------------------------------------------------------------------------------- There's none anymore. But if it's -- this virus ever sets or passes, there's 2 in the U.S. and 1 international. The 2 in the U.S. is ABC in Las Vegas, and JPMA, which this year was going to be held in Orlando, and they were both canceled. And we have elected to not show at either one of those shows. We backed out of them. We showed for years and years and years, and we backed out a couple of years ago. And we only show now at one show, and we backed out of for this year. And we think that share will be canceled, and that's in Germany. And it's K + J and that's probably going to emerge as the biggest trade show for baby in the world or it is already and -- as the others shrink. -------------------------------------------------------------------------------- John Eric Deysher, Bertolet Capital Trust - Pinnacle Value Fund - Portfolio Manager [39] -------------------------------------------------------------------------------- So that's the only one you're going to going forward? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [40] -------------------------------------------------------------------------------- That's -- for the last 2 years, that's the only one we've been to. And for the one this year, K + J was in September, and we have backed out of that. And we think they're probably going to cancel. -------------------------------------------------------------------------------- Operator [41] -------------------------------------------------------------------------------- And our next question will come from Ralph Marash of First Manhattan. -------------------------------------------------------------------------------- Ralph P. Marash, First Manhattan Co. - MD & Portfolio Manager [42] -------------------------------------------------------------------------------- I had a couple of questions about the PPP loan. First of all, it's no interest, if I remember correctly? -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [43] -------------------------------------------------------------------------------- Actually, it's -- there is a minimum interest rate of, I think, it's 1%. -------------------------------------------------------------------------------- Ralph P. Marash, First Manhattan Co. - MD & Portfolio Manager [44] -------------------------------------------------------------------------------- Okay. And how much of that do you anticipate being forgiven? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [45] -------------------------------------------------------------------------------- Ralph, that's an unknown right now. As you know, I'm not going to say the law changes, but the speculation keeps changing day in and day out, but we don't know. I mean we expect the majority of it will be and should be. And -- but we won't know until it's all said and done. -------------------------------------------------------------------------------- Ralph P. Marash, First Manhattan Co. - MD & Portfolio Manager [46] -------------------------------------------------------------------------------- Okay. And what's the term of the loan? -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [47] -------------------------------------------------------------------------------- Two years. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [48] -------------------------------------------------------------------------------- Two years. -------------------------------------------------------------------------------- Ralph P. Marash, First Manhattan Co. - MD & Portfolio Manager [49] -------------------------------------------------------------------------------- Okay. If I recall correctly, one of the elements of the loan is that you either cannot or should not pay dividends? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [50] -------------------------------------------------------------------------------- Ralph, that is not in the legislation in the field. It is not specified. Okay? -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [51] -------------------------------------------------------------------------------- For the -- specifically for the Paycheck Protection Program. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [52] -------------------------------------------------------------------------------- Yes, for the Paycheck Protection Program. -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [53] -------------------------------------------------------------------------------- There are other parts of the CARES Act that do have that. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [54] -------------------------------------------------------------------------------- But the PPP, the one that we're under, it did not prohibit dividends, and it didn't really address it. There were some larger ones that Olivia is referring to, I forget the name of them, but larger corporations that come under gets prohibited that. To give you an example, Delta Airlines, okay? They come under a very large loan, and I think they have to suspend dividends. -------------------------------------------------------------------------------- Ralph P. Marash, First Manhattan Co. - MD & Portfolio Manager [55] -------------------------------------------------------------------------------- Okay. And the loan was made through your normal banking channels? -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [56] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [57] -------------------------------------------------------------------------------- It was done through our normal banking channels. Yes, sir. -------------------------------------------------------------------------------- Operator [58] -------------------------------------------------------------------------------- Our next question will come from Dennis Scannell of Rutabaga Capital. -------------------------------------------------------------------------------- Dennis J. Scannell, Rutabaga Capital Management LLC - Principal & Portfolio Manager [59] -------------------------------------------------------------------------------- I was kind of curious to drill down into the sales gains that you saw in -- on the Internet. So I was going through, like I think a previous presentation that you guys did that had some data from your fiscal '19, and I saw that Amazon was listed as a 16% customer. And then what you identified as DTC was 9%, so total 25%. And then we're talking about 1/3 or more of sales over the Internet in the current fiscal -- or the past fiscal year for '20. So -- and I know from your 10-K that Amazon went from 16% fiscal '19 to 20% in '20. So is that -- would that additional 13% plus, would that all go in that DTC category? Or there -- is there another way of thinking of that? -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [60] -------------------------------------------------------------------------------- We have other customers that aren't listed in that pie chart, and I'll give you an example. I mean like we ship dot-com for Buy Buy Baby, we ship dot-com for Walmart. So sometimes the pie chart that's in our PowerPoint presentation has the, say, walmart.com mixed into the Walmart number and so it's all over the place if you're looking at that pie chart. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [61] -------------------------------------------------------------------------------- And plus, we have a number of Internet retailers that are independent Internet retailers that do quite a nice job to specialize in baby. -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [62] -------------------------------------------------------------------------------- And that would be another. -------------------------------------------------------------------------------- Dennis J. Scannell, Rutabaga Capital Management LLC - Principal & Portfolio Manager [63] -------------------------------------------------------------------------------- Got it. Okay. Great. That's helpful. Would you identify... -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [64] -------------------------------------------------------------------------------- That's is basically over 1/3 of the business now. -------------------------------------------------------------------------------- Dennis J. Scannell, Rutabaga Capital Management LLC - Principal & Portfolio Manager [65] -------------------------------------------------------------------------------- That's terrific. So would you identify -- how much you would identify as direct-to-consumer? I mean was it still around that 9% or 10%? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [66] -------------------------------------------------------------------------------- Maybe a slight bit less. -------------------------------------------------------------------------------- Olivia W. Elliott, Crown Crafts, Inc. - VP, CFO & Secretary [67] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [68] -------------------------------------------------------------------------------- It's in the neighborhood but maybe a slight bit less. -------------------------------------------------------------------------------- Dennis J. Scannell, Rutabaga Capital Management LLC - Principal & Portfolio Manager [69] -------------------------------------------------------------------------------- Okay. And refresh my memory, what is identified as direct-to-consumer, is that all just Carousel Designs? Or is that more broadly other products that you would also be offering? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [70] -------------------------------------------------------------------------------- No. Dennis, at this point, that's 100% Carousel Designs. We don't do direct-to-consumer at NoJo or Sassy. We, at NoJo and Sassy, we elect to work through other retailers, i.e., Amazon and other -- as Olivia said, and Walmart, Buy Buy Baby, et cetera. -------------------------------------------------------------------------------- Dennis J. Scannell, Rutabaga Capital Management LLC - Principal & Portfolio Manager [71] -------------------------------------------------------------------------------- Excellent. Okay. Great. And then one last one for me. Again, in the -- just kind of skimming through the 10-K. I think if I read this correctly, you talked about international sales being 6% in fiscal '20, up from 4%. And I know you had identified international as a place to grow. So it actually looks like a pretty nice increase. Is that kind of -- is that tracking with your expectations? -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [72] -------------------------------------------------------------------------------- It is. We would like to see, Dennis, it grow a little faster. But we've had some growth problems there. Some of them are credit-related where you can't get credit from some countries and just supply problems. We're not dissatisfied with it. We're pleased with it. It's growing nicely, but we would like to see it grow fast. -------------------------------------------------------------------------------- Operator [73] -------------------------------------------------------------------------------- This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Randall Chestnut for any closing remarks. -------------------------------------------------------------------------------- E. Randall Chestnut, Crown Crafts, Inc. - Chairman, CEO & President [74] -------------------------------------------------------------------------------- Andrea, thank you very much. And again, although this has been a very difficult time, your company has addressed each day's challenge, and we remain solid going forward into the future. We'd like to thank all of our customers, employees, suppliers and shareholders for their continued interest and support in Crown Crafts. Fiscal 2020 was a great year, and we're excited about our future. Thank you very much. Have a good day. -------------------------------------------------------------------------------- Operator [75] -------------------------------------------------------------------------------- The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.