UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Exchange Act of 1934 (Amendment No. )
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CROWN CRAFTS, INC.
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| For immediate release | July 24, 2007 |
Crown Crafts’ Open Letter to Stockholders Outlines the Real Story
Gonzales, Louisiana — Crown Crafts, Inc. (NASDAQ-CM: CRWS) announced today that the Company has
sent a letter to its stockholders in conjunction with its annual meeting of stockholders to be held
in Gonzales, Louisiana on August 14, 2007. The Company urged its stockholders to consider the
accomplishments and objectives of the Board detailed in the letter. The Company stressed the
importance of this vote and asked stockholders to vote their shares on the WHITE proxy card that
they will receive by mail. The body of the letter sent to stockholders is as follows:
VOTE THE WHITE CARD TO SUPPORT YOUR MANAGEMENT AND BOARD
July 24, 2007
Dear Fellow Crown Crafts Stockholder:
Crown Crafts, Inc. will hold its annual meeting of stockholders on August 14, 2007. This year
your vote for the Company’s Board nominees is critical to sustain the Company’s momentum and
preserve the value of your investment.
At the meeting, you will be asked to choose between two opposing slates of directors. We have
nominated three highly qualified candidates for re-election to your Board of Directors — William
T. Deyo, Jr., Steven E. Fox and myself. As nominees, we share a deep commitment to serving your
best interests as investors in our business and believe that our record of increasing stockholder
value deserves your continued support. A New York-based investment fund, Wynnefield Partners Small
Cap Value, L.P., and certain of its offshore and U.S. affiliates (together, Wynnefield or the
Wynnefield Group) have proposed a slate of two director nominees in opposition to Mr. Deyo and Mr.
Fox.
We urge you to support the Company’s nominees, each of whom has demonstrated the type of
integrity, leadership and commitment that is absolutely essential to the stability and success of
your Company. We also urge you to reject the rhetoric of the Wynnefield Group, which intends to
seek reimbursement from the Company for its proxy solicitation expenses (estimated at $325,000)
without seeking your approval, and to reject Wynnefield’s nominees, one of whom is surrounded by a
cloud of SEC litigation and the other of whom is a close business associate, and neither of whom,
although given the chance to do so, has articulated any vision for leading your Company.
CROWN CRAFTS HAS A SOLID FOUNDATION FOR SUCCESS AND DIRECTORS WHO
HAVE AN ESTABLISHED RECORD IN LEADING THE COMPANY
HAVE AN ESTABLISHED RECORD IN LEADING THE COMPANY
We’re proud of significant enhancements in stockholder value.
Fiscal year 2007 was an historic year for Crown Crafts, one in which we celebrated the
Company’s 50th anniversary, saw the Company’s stock begin trading on The Nasdaq Stock Market and
completed a significant overhaul of the Company’s debt and capital structure. From the beginning
of fiscal year 2007 through July 23, 2007, our stock price has climbed from $0.59 to $4.65.
Wynnefield has asserted that the Company’s principal publicly traded competitors trade at higher
multiples, but the Company does not have comparable publicly traded competitors, so exactly who is
Wynnefield referring to? And having been an investor in the Company for several years, enjoying
the Company’s increase in value, how can Wynnefield now complain about our stock price?
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, and
we know
that many of you have been with us to share in that growth and success. The Company went
through a major reorganization in July 2001. Since that time, your Board has led us in refocusing
our business, tenaciously controlling costs and watching our bottom line. With your Board’s
leadership, and with no help from Wynnefield, which has the audacity to characterize the Company’s
business performance as “moribund,” we’ve prospered greatly, increasing stockholders’ equity by
more than $50 million and increasing our market capitalization by more than 700%.
We’re proud of our operational successes.
During a period in which we have seen direct enhancements to stockholder value, we have also
achieved many operational successes of which we are very proud, including the following:
| • | sustained growth in net income | ||
| • | continuing increases in cash flow from operations, almost doubling since 2003 | ||
| • | greater than 10% increase in gross margin over the last five fiscal years |
Our history has been one of growth through strategic acquisitions, and with the increased
opportunity for growth afforded by the Company’s new financing relationship, we are now again in a
position to aggressively pursue that strategy.
The Wynnefield Group’s proxy materials suggest that the Company is not up to the task of
growing its business in today’s marketplace, but we believe that our record shows otherwise. With
integrity, perseverance and leadership, we have survived when many of our friends and competitors
in our industry have failed, and we believe we have the foundation and leadership in place to
accomplish more. Moreover, as Wynnefield knows, the debt and capital structure that we inherited
when we took over management of your Company did not permit us to grow, and now that we have
finally fixed that problem and are poised for growth, Wynnefield wants to sell the Company. This
makes no sense to us.
As Wynnefield notes from our Form 10-K for fiscal year 2007, a substantial portion of our
sales comes from a small number of companies. Those companies — Wal-Mart, Toys “R” Us and Target -
are today’s leaders in the infant products market in the United States, and it is hard to imagine
any infant products company gaining any scale or being very successful without doing substantial
business with these customers. If the Wynnefield Group understood our industry and marketplace,
they would recognize and acknowledge the value of these relationships.
Wynnefield has offered no plan to grow the Company’s business. Instead, Wynnefield only wants
us to explore strategic alternatives for the Company, which I believe means that Wynnefield wants
us to hang a “For Sale” sign on the Company. Though there is no individual stockholder who stands
to gain more from a sale of the Company than I do, any suggestion that we put our Company “in play”
at this time is, in my opinion, ill-timed, ill-considered and misguided and, if pursued, would
seriously disrupt and harm our business and customer relationships and cause many of our key
employees to leave the Company. Do not underestimate the risk inherent in what Wynnefield wants us
to do.
On the other hand, the strategy of your Board and management to develop stockholder value is
intact and has proven to be effective, even during turbulent times, such as when Hurricane Katrina,
our nation’s largest natural disaster, hit south Louisiana in 2005. Although our Company is
headquartered just outside New Orleans, and many of us had family or friends hit hard by the storm,
we soldiered on, losing only one day of work, taking care of our own and keeping our focus on
building the best business we can. We’ll continue to do that, with your support.
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YOUR BOARD AND ITS NOMINEES, AND NOT WYNNEFIELD, ARE COMMITTED TO THE
BEST CORPORATE GOVERNANCE PRINCIPLES FOR CROWN CRAFTS AND ITS STOCKHOLDERS
BEST CORPORATE GOVERNANCE PRINCIPLES FOR CROWN CRAFTS AND ITS STOCKHOLDERS
Who is Wynnefield to tell us about good corporate governance?
Although Wynnefield has been the Company’s largest stockholder for only the past year (and not
for the past eight years, as it claims), we nonetheless gave Wynnefield a voice in the boardroom.
In November 2005, we agreed to permit Mr. Wasserman, one of Wynnefield’s nominees, to participate
in all meetings of the Board as a non-voting observer. We have become familiar with the Wynnefield
Group and its tactics from Mr. Wasserman’s participation in these meetings and related
communications. It is with this history in mind that we urge you to support the Company’s nominees
with your vote.
• The “business at hand.” In a previous letter to you, we brought to your attention
that the SEC has charged Mr. Obus and other members of the Wynnefield Group with “fraud and
deceit.” In subsequent proxy materials from Wynnefield, Mr. Obus asserts that such discussion has
nothing to do with the business at hand. We couldn’t disagree more. The business at hand is who
you will elect to serve on your Board. The SEC is seeking to bar Mr. Obus from serving as an
officer or director of any public company. We don’t believe, and hope you agree, that someone who
the SEC does not want serving on the board of a public company should be serving on the board of
your Company.
• Mr. Obus’s recent conduct further concerns Board. The Wynnefield Group has raised the
issue of the Board exploring strategic alternatives, including strategic combinations or a sale of
all or part of the Company’s business. As we have said before, we believe Wynnefield wants to sell
Crown Crafts. This does not come as a surprise to the Board. While Mr. Wasserman was serving as a
Board observer on behalf of Wynnefield, Mr. Obus contacted me and urged me to contact the CEO of
another public company directly about engaging in a possible transaction for the sale of the
Company without first consulting the Board. During our conversation, Mr. Obus admitted that he had
already spoken with the CEO on his own without notifying me or the Board. Not surprisingly, the
Board found this conduct to be wholly inappropriate. The Board nonetheless considered Mr. Obus’s
request and, after a thorough review of the merits of what Mr. Obus had proposed, concluded
unanimously that Mr. Obus’s plan was not in the best interests of our stockholders. On the heels
of that determination, Wynnefield launched its proxy contest. We can’t help but believe the two
matters are related.
• Mr. Wasserman’s recent request also concerns Board. We are proud, of course, that our
stock is now traded on Nasdaq. We’re also proud that our stock value has stood on its own.
Earlier this year, while the Company was working through the listing application process, Mr.
Wasserman contacted me, at the express request of Wynnefield, and urged me to contact the Company’s
investor relations firm and ask them to encourage large stockholders to acquire shares of the
Company’s stock to strengthen the stock price in order to satisfy Nasdaq’s price criteria. Again,
the Board found this to be, at the least, wholly inappropriate. Needless to say, we did not do
what Mr. Wasserman asked us to do.
Your Board believes in best practices.
Your Board is committed to the highest ethical standards, and each of its members is
experienced, knowledgeable and, with the exception of myself, independent. Your Board’s focus is,
and always has been, on what is best for Crown Crafts and its stockholders.
In its proxy materials, the Wynnefield Group has criticized the Company’s staggered board
structure, claiming that it is inconsistent with modern corporate governance trends and serves to
entrench directors. However, you should know that, according to TrueCourse, Inc., a financial
research and consulting firm, a majority of the public companies included in the S&P 1500 have
staggered boards. In any event, your Board’s primary concern is determining what is best for Crown
Crafts and its
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stockholders. The Board has determined that the Company and its stockholders are best served by
continuity and stability. The Company’s performance supports that determination.
We believe that only a collegial board can function effectively and have the type of
relationship with the CEO that is necessary for the board and CEO together to agree on the
corporate mission and work collaboratively to increase stockholder value and enhance the
corporation’s business. What the Company needs, and your Board has, are directors who possess
sufficient character and integrity to allow them to make judgments that are not influenced by
considerations affecting themselves or those with whom they have relations. A balkanized board is
a dysfunctional board; a board works best when it works as a unified whole, without camps or
factions and without internal divisions, which is what we believe would result from the election of
the Wynnefield nominees.
Wynnefield also challenges Mr. Fox’s service on the Company’s compensation committee. Mr. Fox
is a partner in Rogers & Hardin LLP, the Company’s outside legal counsel, which derives less than
1% of its revenue from Crown Crafts. Although Wynnefield claims that I selected Rogers & Hardin to
be the Company’s outside counsel, that decision was in fact made by your Board. Many public
companies have outside counsel on their boards. They recognize the value of having a lawyer on the
board who is familiar with the company and understand that such service often facilitates better
corporate governance practices. This view is consistent with that of your Board and your Board’s
collective feeling that Mr. Fox is fully committed to building the Company’s long-term value for
its stockholders. As we have previously stated, Mr. Fox has notified the Company that, in response
to Wynnefield’s concerns, and as a showing of his commitment to best practices, he will resign from
the compensation committee immediately following the annual meeting if he is re-elected to the
Board.
Wynnefield says they are also concerned that the Company has not publicly disclosed a
succession plan. However, the Board has considered succession matters and is satisfied that it has
in place an appropriate succession plan. And despite Wynnefield’s purported concern regarding my
health history, the last time I had any type of medical problem was in the early 1990s, and I am
pleased to report that you have a CEO who has recently checked out to be in good health.
Your Board put in place a $6 million stock repurchase program.
As we have previously reported, your Board has authorized a $6 million share repurchase
program. This program was approved following discussions with a number of the Company’s
stockholders, Wynnefield among them, but certainly not limited to Wynnefield. Your Board carefully
considered this program, giving due consideration to the elements of the program. In fact, the
Board’s thorough review and the time it took to get approval for the plan from the Company’s lender
gave Wynnefield just enough time to announce its nomination of an opposition slate of directors
only days before the repurchase program was finalized, prompting Wynnefield to claim in its proxy
materials that the repurchase program may have been put in place only to curry favor with the
Company’s stockholders during a proxy contest. Wynnefield surely knows better, given that it had a
representative in the room during all the Board’s deliberations concerning the buyback. Your Board
deserves credit for the share repurchase program.
SUPPORT THE NOMINEES YOU CAN TRUST
The Wynnefield Group claims that your Board “has grown stale and needs an infusion of new
blood and fresh thinking.” We find this curious in light of the fact that, on behalf of
Wynnefield, Mr. Wasserman has attended, and participated in, all of the Company’s Board meetings
for the past 18 months. As we have said, Wynnefield has had a voice. When we accepted Mr.
Wasserman as a Board observer, we were told then that he would bring us experience and good
business judgment. Instead, he has merely told us what Wynnefield wanted and has provided no input
into the Company’s operational strategy. Why should you expect either him or Mr. Obus to provide
more as a director?
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Crown Crafts needs directors who avoid short-term thinking and appreciate the Company’s
history, its industry and the relationships that management has forged with licensors, customers
and suppliers. Your management needs the support of directors with that understanding and
experience. We do not believe the Wynnefield Group’s nominees possess the business, industry or
leadership experience necessary to be qualified candidates for your Board of Directors.
To vote your shares, please sign, date and return the enclosed WHITE proxy card by
mailing it in the enclosed pre-addressed, stamped envelope. You can also vote by internet or
telephone by following the instructions on the WHITE proxy card. Please do not sign or
return any gold proxy card sent to you by the Wynnefield Group. If you have any questions or need
any assistance voting your shares, do not hesitate to contact Georgeson Inc., who is assisting us
in this matter, toll free at 1-888-605-7561.
We thank you again for your continued support.
| On behalf of your Board of Directors, |
||||
|
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| E. Randall Chestnut | ||||
| Chairman, President and Chief Executive Officer | ||||
About Crown Crafts
Crown Crafts, Inc. designs, markets and distributes infant and juvenile consumer products,
including bedding, blankets, bibs, bath items and accessories. Its subsidiaries include Hamco,
Inc. in Louisiana and Crown Crafts Infant Products, Inc. in California. Crown Crafts is America’s
largest producer of infant bedding, bibs and bath items. The Company’s products include licensed
and branded collections as well as exclusive private label programs for certain of its customers.
This document contains forward-looking statements within the meaning of the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Such
statements are based upon management’s current expectations, projections, estimates and
assumptions. Words such as “expects,” “believes,” “anticipates” and variations of such words and
similar expressions identify such forward-looking statements. Forward-looking statements involve
known and unknown risks and uncertainties that may cause future results to differ materially from
those suggested by the forward-looking statements. Reference is made to the Company’s periodic
filings with the Securities and Exchange Commission for factors that may impact the Company’s
results of operations and financial condition. The Company does not undertake to update the
forward-looking statements contained herein to conform to actual results or changes in our
expectations, whether as a result of new information, future events or otherwise.
| Contact: | Chris Hayden Georgeson Inc. (212) 440-9850 |
|
| or | ||
| Olivia Elliott Secretary — Treasurer (225) 647-9124 |
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