Value Find: Crown Crafts Inc.

With a push from its largest shareholder, little-followed microcap play Crown Crafts Inc. (Nasdaq:CRWS) could be poised to finally unlock shareholder value in the coming quarters.

On July 3, Gonzalez, La.-based Crown Crafts announced a settlement agreement with Wynnefield Capital, its largest shareholder. The agreement averts a proxy contest showdown between the long-time shareholder and the designer of infant and toddler bedding, blankets and accessories. As part of the settlement, Crown agreed to add a Wynnefield nominee to the company’s board of directors. Crown also agreed to form a strategic review committee to explore strategic alternatives. Wynnefield is permitted under the agreement to increase its ownership stake in Crown up to 20%. The investment firm currently holds around a 15% stake.

Following a successful restructuring in 2001, Crown has maintained profitability since 2002 through a combination of organic and acquisition-driven revenue growth and sensible moves to clean up its capital structure. The $32 million market capitalization company is the largest producer of infant bedding, bibs and bath items in the United States. Crown’s products are marketed under a variety of company-owned trademarks, such as NoJo and Hamco, as well as licensed trademarks. The sale of products under licenses from Walt Disney Co. (NYSE:DIS) accounted for 30% of total revenue in fiscal 2008. Crown’s top customer is Wal-Mart Stores Inc. (NYSE:WMT), followed by privately held Toys “R” Us, Inc., and Target Corp. (NYSE:TGT).

For fiscal 2008 ended March 30, Crown reported revenue of $74.9 million and net income of $4.4 million, or $0.43 a diluted share, compared with year-ago revenue of $69.2 million and net income of $3.9 million, or $0.39 a diluted share. This reported net income total for fiscal 2007 excluded a gain on refinancing, net of taxes, . . .

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