Hello, ladies and gentlemen, and welcome to the Crown Crafts, Incorporated Investors Call. Your host for today’s call is Mr. Randall Chestnut, Chairman, President and Chief Executive Officer. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. Any reproduction of this call, in whole or in part, is not permitted without prior written authorization from Crown Crafts, Incorporated. And as a reminder, this conference call is being recorded today, February 8, 2018. At this time, I would now like to turn the conference call over to Ms. Olivia Elliott, Vice President and CFO, who will begin the call. Please go ahead.

Thank you. Welcome to the Crown Crafts investor conference call for the third quarter of fiscal 2018. With me today is a Randall Chestnut, the company’s President and Chief Executive Officer.

Good afternoon.

A telephone replay of this call will be available one hour after the end of the call through 4:00 p.m. Central Time on February 15, 2018. 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.

Again, good afternoon. Olivia, thank you. And we're today discussing our third quarter which ended December 31, 2017 and a press release and Form 10-Q went up this morning before the market opened with all the information in it for the quarter. This quarter I am only going to cover the highlights of the quarter's performance, Olivia will review more details on the call later before we open it up for Q&A. We're pleased with the help of Carousel Designs, the sales for the quarter were up compared to prior year. However, during the quarter, we experienced some challenges that caused the decrease in profitability and I am going to touch on a few of those. We had acquisition expense related in the quarter to both Carousel Designs and Sassy, Carousel we had acquired in August and Sassy we acquired in mid-December, we had credit costs associated with the major customer who filed for bankruptcy just prior to the beginning of the third quarter. We also in the third quarter discontinued shipping to another major customer due to credit concern. Due to the timing of the Sassy acquisition we reported several weeks of expense but only recording an insignificant amount of additional shipments during the quarter. In one of our subsidiaries we also experienced a shift in both customer and product mix from more profitable business to business which was less profitable. In addition, during the quarter -- the third quarter we had normal closeout sales which are typically sold at lower margins. In addition, looking backwards to the prior year before the third quarter had lower than normal closeout sales. We had several non-cash charges to income tax expenses which were recorded as a result of the recent tax legislation. These charges amounted to $541,000 and had the effect…

I am only going to give financial highlights for more details please refer to the company's Form 10-Q filed with the Securities and Exchange Commission this morning. Net sales were 17.5 million for the third quarter of fiscal 2018, compared with 17.3 million for the third quarter of the prior year, an increase of $214,000 or 1.2%. For the nine-month period net sales were 47.6 million which was down $1.1 million or 2.2% from 48.7 million in the prior year. The increase for the quarter is due to sales of Carousel which added 1.8 million in sales in the current year, this amount was offset by decrease of 1.6 million in sales of our Crown Craft Infant Products which resulted from reduced product shipments in the current year to a customer that experienced credit problem, a shift to a less profitable customer and product mix, and higher sales of closeout inventory which are typically filled at lower margin. Also affecting sales is the continuing change in the infant bedding marketplace, in which parents are purchasing fewer bedding sets in favor of a separate, leading to a lower average price point for the company's infant bedding products. Gross profit decreased by $370,000 and decreased from 32.7% of net sales for the prior year quarter to 30.1% of net sales for the current year quarter. Year-to-date gross profit decreased by $342,000 and was steady at 29.2% of net sales for the current and prior year, the decrease in amounts for both the three and nine months period is due to higher sales of closeout inventory at lower margins in the current year as well as the shift in the current year to a less profitable customary product mix. Marketing and administrative expenses increased by 1.1 million for the current year quarter compared…

Okay. Before we open it up for questions, just to sort of wrap it up, we've said this many time before, we'll say it again. Our position in the market remains very strong and we're pleased with where we're in the market. We have strong licenses and very good designs. To repeat what I said earlier we are excited about the acquisitions that we've made over the past few months. Our Carousel Designs in August and Sassy 14, LLC which we now call Sassy was completed in December of 2017. And those two helped to diversify our customer and product mix and we're making a major impact going forward, we're pleased with that. Last but not least we're pleased that we're able to return to the shareholders another quarterly dividend of $0.08 per share. So, Jamie if you come back, we'll open it up for questions.

Ladies and gentlemen at this time we'll begin the question-and-answer session. [Operator Instructions] And our first question today comes from Dave King from Roth Capital. Please go ahead with your question.

So, given several moving parts this quarter, I've got a bunch of questions if you'll bear with me, to begin first off on the onetime charges if you will, 541,000 or so, or $0.05 does that then include all the merger costs, all the bankruptcy related credit costs and the tax charges and there're any other onetime items?

No, the tax itself by itself was over $500,000. And -- how much was it…

The taxes were $541,000 [indiscernible].

So, then plus it another…

Just the taxes were 541,000.

And then 970,000 it sounds like on top of that at least…

On a post-tax basis. Yes.

So then along those lines in terms of the merger cost portion of that on a pretax basis, it seems 160K Olivia do you have how that breaks up between cost of goods sold and SG&A expenses?

A $1 in SG&A.

And then on Sassy acquisition, Randall in your -- in the press release, and then in your prepared remarks I think you talked about the uptick in expenses that came but not much of a revenue benefit. Are you able to kind of quantify or kind of talk about the magnitude of those, I think Sassy is on $11 million revenue business, how do we think about that seasonally just some context around some of those numbers I think would be helpful to kind of get a sense of what the underlying…?

Dave what we shipped in December was almost nothing. It was less than $25,000. Anymore when you buy a company the integration, one of the big hurdles that you got to get through with the major retailers is to get them to change their vendor agreements and EDI arrangements for electronic data interchange and believe me with that coming right before the holidays a lot of people being gone, we didn't get a big number of those companies to switchover until after f the holidays. So, we couldn't receive our ship orders and we were able to get out some very small orders, so it had a very-very slight impact in December. We've gotten shipping and we're shipping now and the fourth quarter and the January-February-March quarter and we have gotten everybody now, I think as of last week all the major retailers have switched over and were onboard and we've got them lined up to start shipping now. So, it should flatten out and there's not a huge amount of seasonality, there's some slight ebbs and flows but it's fairly constant throughout the year.

Then lastly on Sassy, how should we think about the -- you probably don’t want to talk about gross margins and stuff like that, but how should we been to think about the EBITDA contribution from that or expense contribution from that on an annualized basis, is it similar to legacy Crown Crafts?

Dave, we don't break it out but once we did the -- we've moved them now to a new office in Grand Rapids, the eight or so people that remained with us are now in a small I think 3,400-3,500 square foot office space in Grand Rapids. We are currently shipping out of a third-party warehouse in Grand Rapids and we at the end of our fiscal year which is March we are going to move all of that inventory over a couple of weeks from Grand Rapids to our facility in Southern California, and we have space we can put it into our existing building. So, the overhead contribution once we get that done is going to be good, so the best answer I can give you is the one that you create it yourself, you can look at going forward, it should have because it's going to merge in to Hamco, it should have gross margins and contributions and EBITDA very similar, maybe a wee bit lower because of a product category but very similar to the legacy companies.

And then on Carousel, I guess this is my last question, in terms of Carousel do you have what the revenue contribution was in the quarter and then more importantly can you update us on where things stand with getting some potential revenue synergies there, whether that's putting some of their bedding products online, rolling out from your own e-com capabilities etc.?

Well there's not Dave as we said last call, there's not -- this one is not going to tape itself with synergies, it's going to tape itself because it's a new channel of distribution that we're not in currently. We can add things to it and we will, and I'll give you an example. We began shipping a few weeks ago, if you go to the home page of their website Sassy -- excuse me, Carousel, babybedding.com, I'll get it right, if you go to the opening page, you can click on and you can create your own Disney customized sheet and put your child's name in the center of the sheet and we'll custom print it for you and send it to you. So, we have with the help of the licenses that we've had at CCIP, we were able to get that added on to our contract, so we're excited about that and we're doing some other things. So, the contribution from Carousel is bringing about entirely different customer base, entirely different product, no two customers are alike, and hopefully since it's thousands of customers we hope not to be dealing with bankruptcy issues with them. And its all prepaid I might add.

And to address the first part of your question, Carousel contributed 1.8 million in the quarter and 3 million for the five months period.

[Operator Instructions] And ladies and gentlemen at this time it is showing no additional questions, I'd like to turn the conference call back over for any closing remarks.

Okay, Jamie thank you very much and thanks to everyone on the call. And as wrapping up we'd like to say thank you to all of our customers, employees, suppliers, and shareholders for their continued interest and support of Crown Crafts. A reminder, our next conference call will be a little bit more -- little bit further down the road because this is our fourth quarter, our year ends in March, so the call will take place in what Olivia?

Middle of June.

Middle of June, so we'll speak to you again in a few months, thank you, have a great day, have a good day, bye.

Bye.

Ladies and gentlemen with that we'll conclude today's conference call. We thank you for attending for today's presentation, you may now disconnect your lines.