Hello, ladies and gentlemen, and welcome to the Crown Crafts, Inc. investor conference call. Your host for today's call is Mr. Randall Chestnut, Chairman 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. And as a reminder, this conference is being recorded today, February 10, 2021. At this time, I would now like to turn the call over to Ms. Olivia Elliott, President and Chief Operating Officer, who will begin. Please go ahead.

Thank you. Welcome to the Crown Crafts investor conference call for the third quarter of fiscal 2021. With me today is Randall Chestnut, the company's Chief Executive Officer.

Hi. Good afternoon.

A telephone replay of this call will be available 1 hour after the end of the call through 4:00 p.m. Central Standard Time on May 11, 2021. 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 and its history of paying dividends, 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.

Olivia, thank you, and good afternoon again to everyone. As this is the first investor conference call since the promotion of Olivia Elliott to President and Chief Operating Officer, I'd like to call special attention to this event, which occurred January 4 of this year with the beginning of this quarter. Olivia joined the company in 2001 and has spent the past 20 years running the financial and operations of the company. Her knowledge makes us -- her the best executive to tackle this important role. We're pleased that we could promote from with them. Soon, we hope to announce the appointment of someone as Vice President and Chief Financial Officer to relieve Olivia of that direct responsibility. As investors, I would ask when you get an opportunity, please join me congratulating Olivia on her new role. Okay. For the third quarter, and that's the only -- I'm going to address only the third quarter, Olivia will address the year-to-date when she makes her presentation. Net sales for the third quarter were $19.5 million this year as opposed to $18.8 million last year or an increase of $889,000 or 4.8%. Net income for the quarter was $2.141 million as opposed to $2.095 million or an increase of $46,000 or 2.2% over last year's same quarter. Diluted earnings per share was $0.21 this year as well as $0.21 last year. As I said, Olivia will address the year-to-date numbers a little later in the call. The third quarter performance was an improvement in net sales and net income over the previous year, which we're very pleased with. The effect of certain tax credits were included in this year's first quarter of $74,000 or $0.01 per diluted share and last year's third quarter of $274,000 or $0.03 per diluted share. If you…

Thank you, Randall. I'm only going to give financial highlights. For more detailed analysis, please refer to the company's Form 10-Q filed with the Securities and Exchange Commission this morning. Net sales were $19.5 million for the third quarter of fiscal 2021 compared with $18.6 million for the third quarter of the prior year, an increase of $889,000 or 4.8%. Net sales were $57.3 million for the first 9 months of fiscal 2021 compared with $53.1 million for the same period of the prior year, an increase of $4.2 million or 8%. The increase in sales is due to higher sell-through at major retailers, which has been partially offset by declines at certain customers that have been impacted by the COVID-19 pandemic, particularly, one customer that has remained closed throughout the entire 9-month period of the current year. Gross profit increased by $332,000 and increased from 31.3% of net sales for the prior year quarter to 31.6% of net sales for the current year quarter. Gross profit increased by $2 million, an increase from 30.6% of net sales for the prior year 9-month period to 31.9% of net sales for the same period in the current year. The increase in gross profit is due to the increase in net sales as well as a more favorable customer and product mix. Marketing and administrative expenses were flat at $3.4 million for both the current and prior year quarters, but decreased from 18.4% of net sales for the prior year quarter to 17.6% of net sales for the current year quarter. Marketing and administrative expenses increased by $258,000, but decreased from 19.5% of net sales for the prior year 9-month period to 18.5% of net sales for the current year 9-month period. The increase in amount for the current year-to-date period is…

Olivia, thank you very much. And Chad, if you'll come back up, we'll open it up to any questions that anyone might have on the line.

[Operator Instructions]. And the first question will be from Linda Bolton-Weiser with D.A. Davidson.

Congratulations, Olivia, on your promotion. I was curious when you're talking about bringing somebody into the CFO role. Do you think you'll promote from within? Or are you looking at outside candidates?

At this point, we prefer not to say, Linda. We're still -- it's still being ironed out.

Okay. And congratulations on the quarter, I mean it was really good profit growth and you're seeing some nice leverage because of your sales growth. In looking at your segments, I did notice that the bibs, bath, toy, feeding segment was down year-over-year, whereas it was up last quarter. Is there something that changed there? Or why was it down whereas it was up in the second quarter?

No, Linda, nothing really changed. The biggest thing that changed probably was we had an upcoming reset, which we've now implemented and we're almost through it at one of our major customers. And when they start doing that, they start paring down on the existing inventory, meaning -- paring down mean they slow down buying of inventory. But nothing has changed that -- except basically that.

Okay. And your growth continues to be really good overall, though, especially on the bedding, blankets and accessory side. I imagine that's driven by e-commerce. Can you -- are you able to tell us how much your e-commerce sales were up in the quarter versus your brick-and-mortar sales?

We don't disclose those numbers, Linda, but it was up appreciably, it really was. And we don't disclose them and therein lies a little bit of a fallacy when you compare Sassy, the bibs to NoJo because the bibs at Sassy, the price point of the bibs don't lend themselves very well for Internet sales because in many cases, the price of the merchandise would not be as big as the freight would be. So therefore, it makes it difficult -- a little bit difficult unless you bundle them, which we do where we can and ship multiple units. So we don't break those numbers out.

Okay. So overall, I mean your growth, it does seem to have picked up here during the pandemic. Do you think it's just that consumers have more time to think about decorating their child's bedroom or buying new things for their child or infant? Or is there something else that you can point to that has actually changed consumer buying behavior here during the pandemic?

No, not really. I mean we're hearing from a lot of different -- not just in our category, but in other categories, unrelated to baby. Because people are staying home. They're buying more for the home to fix the home up and take pride in that. So we're hearing that from a lot of different sectors, and I'm sure you are, too. But that would be the biggest thing. I mean that has helped, there's no question about it. It's hurt the American economy. But nevertheless, it's helped our business and also the stimulus checks there, too.

Right. Okay. I guess I'm a little curious about a couple -- some of my companies have been talking about starting to face some commodity cost pressures. Are you starting to see that? Or do you expect that in coming periods?

We do, Linda. There's no question about it. The U.S. dollar to the RMB has fallen roughly 10% since last May. So Chinese suppliers are starting to come forth and say, we've got to have increases. And we've taken a posture with it. We know they do. And in some cases -- many cases, we will grant some increases, but we've also taken a very tough approach. And if we grant an increase, we're going to pass it on to the retail because the RMB change of the dollar has nothing to do with our business. It's all related to the amount of -- the stimulus and the amount of money that the U.S. government has printed to afford the stimulus check, so it's devalued the dollar. And that's without our -- it's out of our control. So as we did with tariffs, we're going to bite the bullet and do what we have to do and pass it on.

Okay. I'm just wondering in looking at my fourth quarter projections, I know you don't give guidance or anything. But in the prior year fourth quarter, there did seem to be a little bit of an escalation in advertising expense. Is that something that the ratio spending increases always in the fourth quarter? Or was there something special last year? I'm just thinking how I should think about that comparison in the fourth quarter?

I'm not recalling anything that was special in the fourth quarter. I think advertising will stay fairly steady when you look at this year. I don't recall anything special, but I also don't think it's going to happen this year, anything extraordinarily compared to the first three quarters.

And except for Carousel, our advertising, Linda, is more support for the retailers through their advertising campaigns. I mean we really don't go out in the market and buy advertising except for Carousel.

Okay. So I'm just curious, I know this happened a long time ago. But in terms of the Toys "R" Us bankruptcy and you actually managed through that pretty well. Have you found that your products have found new homes in terms of new distribution in some cases or expanded distribution? Is -- are there any other changes that have been like permanent changes that have taken place since that time? And have you kept all that new distribution that you gained after the Toys "R" Us bankruptcy?

Well, I mean, I can't sit here and say the dollar for dollar we have, but we took a look and then kept on going. And I think, yes, we've overcome that, okay? It took a few quarters to do it. You don't lose that kind of business. They were our second largest retailer without feeling the impact of it, and we did feel the impact of it. But yes, I think we're pretty much over that. And we don't want to do it again, let's put it that way.

Are you experiencing any issues with having supply retailers that have gone under here during the pandemic? Or is that relatively small impact?

For us, it's relatively small impact, Linda. We don't sell a whole lot of the independent retailers. We do a little in the toy side of the business. But keep in mind, those impacts don't really affect us. We factor everything we do pretty much. I say pretty much, 99.8%, we factor. So we're covered and -- from a credit standpoint. So we don't take the risk. And -- but there's been, to my knowledge, very few. And no, it's not had an impact on us.

Okay. And lastly, I guess, I would just like to ask about some of your international growth opportunities and progress. You had been talking about some opportunities. How is that progressing? Are you continuing to further penetrate the international markets?

We are, Linda. It's honestly the pandemic slowed it down. There's no question about it because trying to get merchandise out of Asia into other countries has been a little bit of difficulty, but we're still pursuing it. We've got a conference call with a person on Friday that we're starting to ramp it back up and try to build that business as much as we can. We had a good momentum going. And it's just -- the pandemic did slow it down. We're still doing a fair business, but it slowed it down.

[Operator Instructions]. Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Randall Chestnut for any closing remarks.

Chad, thank you very much, and thanks to everybody that was on the call today. As we said in the early opening, we're very proud of the performance of the quarter and the year-to-date period. When we started this year out, there was a lot of uncertainty and a cloud hanging over, and we came out with 3 quarters, knock on wood, we got 1 more to go, but we came out with 3 quarters that were phenomenal. We'd like -- for that, we'd like to thank all of our employees, suppliers, customers, shareholders for their continued support, and we look forward to speaking with you after we close our year-end, which will be sometime in...

Mid-June.

Mid-June. Thank you very much, and this concludes our conference. Have a good day. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.