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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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CROWN CRAFTS, INC.
(Name of Registrant as Specified in its Charter)
WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P.
WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P. I
WYNNEFIELD SMALL CAP VALUE OFFSHORE FUND, LTD.
WYNNEFIELD CAPITAL MANAGEMENT, LLC
WYNNEFIELD CAPITAL, INC.
CHANNEL PARTNERSHIP II, L.P.
WYNNEFIELD CAPITAL, INC. PROFIT SHARING & MONEY PURCHASE PLAN
NELSON OBUS
JOSHUA H. LANDES
JON C. BIRO
MELVIN L. KEATING
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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The Wynnefield Group
Investor Presentation
Regarding Crown Crafts, Inc.
(Nasdaq: CRWS)
I.
Who is the Wynnefield Group?
II.
Change Needed to Create Stockholder Value
A.
Background of Election Contest
B.
Wynnefield Warned About This in 2007
C.
Years of Underperformance and Entrenchment
D.
Board has No Articulated Strategic Plan; Product Line
Extension Does Not Qualify
III.
Deficiencies of the Current Management-Endorsed
Board Majority
A.
Misaligned Interests Lead to Pursuit of Status Quo
B.
Current Board Not Acting in Stockholders’ Best Interests;
Reinstated “Poison Pill” Without Stockholder Approval
IV.
Wynnefield’s Nominees
A.
Expertise to Address Company’s Challenges
B.
Focus on Increasing Value for All Stockholders
Overview
2
Value investor in small & micro-cap stocks
Largest stockholder of Crown Crafts
Currently own about 17% of outstanding stock
Long-term investor
Invested in Crown Crafts since 1996 and have
increased holdings at a variety of price points to
protect ownership during this period
Who Is The Wynnefield Group?
3
Background of Election Contest
4
CRWS’ Unfulfilled 2007 Promises: Share Price
Pointing to share price of $4.65, Crown Crafts wrote: “In many respects, fiscal year 2007
marked the successful completion of our efforts that began in 2001 to turn the Company
around and reestablish
a solid foundation for growth and success…” [Letter to
stockholders, 7/24/07]
Fact: CRWS stock has never again
achieved that level – down more than 16% since
then (as of July 20, 2010).
CRWS’ Unfulfilled 2007 Promise: Creating Value
Describing a company “more nimble and poised for growth,” it promised “strategic
acquisitions that will build long-term stockholder value” and enhancing stockholder value
through “achieving
organic growth,” among other objectives. [Letter to stockholders,
7/16/07]
Fact: Over the past three years, CRWS has instead completed three small tuck-in
acquisitions
while revenue and operating income remain flat.
Fact: CRWS’ net sales decreased by $1.3 million (1.5%) in FY 2010, despite the
Company’s assertions in its earnings release
that it was a “banner year.”
5
Wynnefield Warned About This in 2007
6
Years of Underperformance and Entrenchment
x
Source: Bloomberg as of July 21, 2010
* TTM = Trailing Twelve Months
*
7
Years of Underperformance and Entrenchment
8
Years of Underperformance and Entrenchment
*Pure Play - Infant and Juvenile Industry Company
9
Years of Underperformance and Entrenchment
* As of 12/23/08, KID became a “Pure Play” Peer after divestiture of giftware business
10
Years of Underperformance and Entrenchment
*Excludes KID, which did not become a “Pure Play” Peer until divestiture of giftware business on 12/23/08
Strategic Review Committee Never Publicly Disclosed
Findings or Even that it had Deliberations
Only After Wynnefield’s 2010 Proxy Announcement Did
Board Proclaim Adoption of “Strategic Plan”
This is first stockholders have heard of this
Still, nothing else disclosed about “plan”
Only thing known about “plan” – if there even is one – is
that it has failed to create stockholder value
This recent announcement is only a product line
extension
The Company’s Micro-Acquisitions Merely Mask
Declining Core Business to Maintain Status
Quo
No Stockholder Value Created by the Board or
Management’s Actions in Recent Times
11
Board Has No Articulated Strategic Plan
Lavish Board and Management Pay Incentivize Status Quo Rather
Than Creating
Stockholder Value
Management:
Board-approved lavish executive compensation and severance
packages – significant amounts of cash; little long-term equity
compensation despite policy statement to the contrary
Board-approved golden parachute payments and tax gross-ups that
could cost more than $5 million – exceeding CRWS’ annual net income
Board-approved incentive plan rewards management with approximately
3.7% of Company if over five years they match the EBITDA multiple at
which peers are currently trading, a handsome reward for average
performance
Board:
Over past three years, total Board compensation was over $1.3 million
while market value declined by $10.6 million (-22%)
In 2008, Board retainers doubled while operating income remained flat
In 2009, one director’s total compensation was $104,126
Majority of Board retainer paid in cash
Current non-employee directors hold only 2% of outstanding voting stock
12
Misaligned Interests Lead to Pursuit of Status Quo
13
Board Not Acting in Stockholders’ Best Interests
Jon C. Biro
Executive Officer
CFO – Consolidated Graphics, Inc.
CFO, Interim CEO – ICO, Inc.
Corporate Director
Aspect Medical Systems Inc.
ICO, Inc.
Public Accounting & Finance
Certified Public Accountant (CPA)
Price Waterhouse LLP
*Current
Melvin L. Keating
Executive Officer
CEO – Alliance Semiconductor
Corp.
CEO – Sunbelt Management
EVP, CFO & Treasurer –
Quovadx Inc.
Corporate Director
Bitstream Inc.*
Infologix, Inc.*
Red Lion Hotels, Corp.*
Aspect Medical Systems Inc.
Integrated Silicon Solutions Inc.
Plymouth Rubber Co.
Price Legacy Corp.
White Electronic Designs Corp.
Strategic Consultant
Warburg Pincus Equity Partners
BTI Systems, Inc.
14
Wynnefield Nominees’ Expertise
Our Nominees are committed to working
constructively with Board to create stockholder value
and address significant corporate governance
deficiencies
Strategic Plan
Form standing Strategic Review
Committee
Hire qualified independent
consultant to help determine
future path
Communicate to stockholders
nature and extent of review
Cause Company to participate in
investor or industry conferences
Corporate Governance
Eliminate staggered Board
Adopt real CEO succession plan
Terminate “poison pill”
Link executive compensation to
Company performance
Split Chairman/CEO roles
Amend non-employee director
compensation; our Nominees will
only take 50% of cash
compensation or donate balance
to American SIDS Institute
Modify change-in-control
agreements
15
Focus to Increase Value for All Stockholders