1. Kelsey McHugh, Yun Zhou, Summer Chen
Crown Crafts, Inc.
Kelsey McHugh, Yun Zhou, Summer Chen

2. Agenda
Share Market Prospect Macroeconomic Overview Industry Overview Company Overview Financial Analysis Valuation Recommendation

3. Share Market Prospects
Portfolio Weight by Cost
Portfolio Weight by Value
Two Year Share Price Performance
5/10/16
Buy 1,000 $9.37
6. 3
Sources: Yahoo Finance

4. Macroeconomic Overview
Annual Births in the US
Source: US centers for disease control and prevention, national center for health statistics
Birth Rates by Selected Age of Mother
Income and Expenditure by Age
Birth rate is increasing for families with more discrestionary income
Source: Bureau of Labor statistics
Source: NCHS, National Valid Statistic System

5. Macroeconomic Overview
Historical Daily Cotton Prices
Crude Oil Prices
Source:
Source: Bloomberg
USD/CNY
Wage in China
Source: Yahoo Finance
Unit: Chinese Yuan Source: Bureau of Statistics (China)

6. Market Size for Baby Durables Market Size for Bedding and Bath Linen
Industry Overview
Market Size for Baby Durables
Market Size for Bedding and Bath Linen
Source: Ibid
Source: "US Market for Bed and Bath Linens," Mintel Market Research,.
Segment: Textiles
Industry Structure
Industry: Toddler and Infant Products
Life Cycle Stage
Mature
Regulation Level
Medium
Capital Intensity
Low
Barriers to Entry
Concentration Level
Competition Level
High
Source: Team Analysis

7. Porters Five Forces Model
Industry Competition
MEDIUM
Threat of New Entrants
HIGH
Bargaining Power of Buyers
Threat of Substitutes
LOW
Bargaining Power of Suppliers
Industry Competition
MEDIUM – highly fragmented market
Threat of New Entrants
Threat of Substitutes
HIGH – relatively low barriers to entry
LOW – no substitute to a baby crib
Bargaining Power of Buyers
Bargaining Power of Suppliers
MEDIUM – can turn to other sources
LOW – many suppliers, relatively cheap raw materials (oil, cotton)

8. Business Description Financial Snapshot Company Overview
Headquartered in Gonzales, Louisiana
One of America’s largest producers of infant, toddler and juvenile consumer products
Designs, markets, and distributes bedding, blankets, bibs, bath and other accessories
Three wholly owned, market-leading subsidiaries
Two acquisitions in the past 7 months: Carousel Designs and Sassy
Sales are made directly to retailers
Fiscal Year End
31-Mar-18
P/E
18.75
Market Cap
63.541M
Current Share Price (03/12/18)
$6.30
Total Shares Owned
200
Net Revenue
65,978M
EPS
0.34
Crown Crafts Timeline
Hamco purchased Neat Solutions
Founded in GA
Purchased Hamco, Inc.
Purchased Carousel Designs
Purchased Sassy Toys
1968
2007
2010
1957
1997
2009
Went public on the American Stock Exchange
Sold off adult bedding business
Hamco purchased Bibsters
2017

9. Subsidiaries Infant/Toddler Bedding Blankets Accessories Reusable bibs
Disposable bibs
Towels
Home products
Developmental baby toys
Premium baby bedding and home décor
Customizable
Acquired in 2017

10. Recent Acquisitions Premium baby bedding and home decor
Asset acquisition closed August 4th, 2017
$8.8 million, funded with cash on hand
Serves customers directly through Amazon, Etsy, and other partners
More than 200,000 unique visitors to the website each month
Developmental baby toys
Asset acquisition closed December 15th, 2017
$6.5 million purchase price
Dominant player for more than 30 years
Innovative products that align with babies’ developmental milestones
Products sold worldwide in over 30 countries

11. Sales Breakdown by Channel

12. Product Lines
Brand Names
Licensed Collections

13. Distribution Channels
Other
International
Souce: FY 2017 Annual Report

14. SWOT Analysis W S T O STRENGTHS Experienced management team
Sustained product innovation
Active history of inorganic growth
No debt besides recent acquisition debt
WEAKNESSES
Mature phase of the corporate life-cycle
Increased competition
Fragmented market W S
OPPORTUNITIES
Inorganic growth
International expansion
E-Commerce presence
THREATS
Highly reliant on contracts with other companies i.e. Disney
Foreign exchange currency fluctuations
Toys R Us closing all US Stores T O

15. Net Sales and Gross Profit
Financial Analysis
Net Income
Net Sales and Gross Profit
Assets
Cash and Dividends

16. Financial Analysis Gross Profit Margin Return on Equity Current Ratio
Turnover

17. DuPont Analysis 2014A 2015A 2016A 2017A 2018P 2019P 2020P 2021P 2022P
Tax burden
61.70%
62.40%
63.60%
63.30%
67.00%
76.50%
Interest burden
99.70%
99.30%
99.60%
101.10%
100.20%
100.60%
101.40%
101.80%
Profit margin
11.50%
10.70%
12.80%
13.20%
8.00%
10.00%
12.00%
Asset turnover
1.8
1.79
1.65
1.32
1.24
1.28
1.27
1.18
1.1
Leverage ratio
1.31
1.29
1.26
1.34
1.25
1.23
1.21
ROE
16.79%
15.15%
17.16%
14.12%
8.78%
13.19%
14.67%
13.53%
12.49%

18. Financial Projections
Sales Driving Factors
Positive
Acquired Carousel which will be beneficial through the direct-to-consumer opportunities.
Acquired Sassy (Dec 15, 2017) will diversify the product portfolio.
Licenses with Disney (which expired in Dec 31, 2017) has been renewed for the upcoming fiscal year (Disney merchandise accounts for 43% of sales of licensed products)
Negative
Declining birth rate in the U.S.
Continuing overall sluggish retail environment
Parents are moving more to the concept of a “naked crib”
Toys ‘R’ Us considers liquidating all stores in the U.S. (19% of sales)
Concentrated customer and licensed products

19. Financial Projections培训
EFFECTIVE TAX RATE
Effective Tax Rate
Cost Driving Factors
Financial
Projection
Strengthening of Chinese Yuan against the Dollar
Higher raw material costs, as well as increases in labor and transportation costs associated with the Company’s sourcing activities in China
Fiscal year 2019 and the after, 23.5% according to Q
Fiscal year %, composite rate since the TCJA was effective as of January 1, 2018
COST DRIVING FACTOR

20. Financial Projections
Net working capital
COST DRIVING FACTOR
Accounts receivable
Accounts receivable driven by sales
Inventory
Inventory since it do not really produce goods, we think it is also driven by sales
Accounts payable
Accounts payable driven by Costs of products sales

21. Valuation WACC Perpetual growth rate Terminal value EBITDA multiple
COST DRIVING FACTOR
Beta 0.45
Cost of equity* 10.1%
WACC* 12.9% (added business risk premium of 3%)
Long-term debt in Q was 2,311 thousands
WACC
Perpetual growth rate
Perpetual growth rate 2.5%
Terminal value EBITDA multiple,
7.3x calculated by TEV/LTM EBITDA, checked with capital IQ
Terminal value EBITDA multiple

22. Recommendation Valuation Range: $6.70 - $7.71 Current Price: $6.30
Reasoning
Decreasing demand
Customer concentration risk
U.S. regulations regarding outsourcing production to China
Uncertain about synergies on recent acquisitions
Recommendation
Hold 1000 shares