Leaner Crown Crafts sees flat earnings in 2Q
Michael J. Knell -- Furniture Today, November 18, 2002
Gonzales, LA — Substantially cutting costs by relocating its corporate headquarters and at the same time trimming staff, Crown Crafts Inc., a supplier of infants products, reported that second-quarter earnings from continuing operations were virtually flat at $2.1 million, or $0.09 cents per fully diluted share, despite a 2.5 percent decline in sales from continuing operations.
But the comparison with 2001 is particularly tricky after the company overhauled and streamlined operations last year, selling off its big adult bedding business to former ceo Michael Bernstein and recording a one-time gain of $25 million as it restructured its debt.
Comparing apples and oranges, the new company with the old, when it included the bedding business, and when profits were inflated by the $25 million non-recurring gain, earnings declined by 92.6 percent, to $2.1 million from $27.1 million.
Sales from continuing operations in the infant's products business slipped by 2.5 percent, to $27.7 million from $28.4 million last year. Overall sales declined by 9.4 percent, to $28.4 million from $31.3 million a year ago, reflecting the sale of the adult bedding business in July 2001.
"We are pleased to report strong second-quarter results in light of the difficult economic environment we are experiencing," commented Randall Chestnut, president and ceo. "Through this challenging economic period, we have focused our energy on those areas that help reduce operating costs, maintain profitability for the company and enhance shareholder value."
Holding earnings from continuing operations steady despite the small 2.5 percent decline in sales of infant's products, the company slashed its operating costs as it moved its corporate headquarters to Gonzales, LA, from Atlanta, pruning its staff in the process. At the same time, costs were pared by 300 basis points, or 3.0 percentage points, to 12.2 percent of sales from 15.2 percent the prior year. Measured in absolute dollars, costs were reduced by 27.4 percent, to $3.5 million from $4.8 million last year.
Helped by deep cuts in costs, operating profits climbed by 11.3 percent from year-before levels, to $3.3 million from $3.0 million.
Lower overhead helped to offset some erosion in average gross margin, which contracted by 90 basis points, to 23.8 percent from 24.7 percent. Given the lower level of overall sales, gross margin dollars declined by 12.5 percent, to $6.8 million from $7.7 million.
Chestnut said Crown Crafts reduced costs "substantially through consolidation of functions and the relocation of our corporate headquarters to Gonzales, LA, which combined corporate operations with one of our operating subsidiaries," the Hamco baby business. "In addition, we have made great strides in international sourcing, which is very important in light of continuing price pressure from the retail sector. By carefully managing our supply chain, the company maintained record low inventories during a period of great uncertainty." Stockpiles were reduced by 1.8 percent in the period, to $16.1 million from $16.5 million the preceding year. Looking ahead, Chestnut commented, "We believe the benefits of these programs will improve our operating results going forward."
Lower overhead helped to offset some erosion in average gross margin, which contracted by 90 basis points, to 23.8 percent from 24.7 percent.
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