| · |
“The
Company’s sales have continued to shrink over the past two fiscal
years.
Net sales - which fell by some 13.4% from FY 2005 to FY 2006 - continue
their seven-year decline in 2007. Operating income remains essentially
flat over the past four years, ranging from $7.4 million in FY 2004
to
$7.9 million in 2007, and is trending downwards over the last six
months
of FY 2007 compared to the year-before period. While the Company’s
two principal publicly traded competitors trade at multiples between
7.9
and 21.8 times earnings, according to Bloomberg, the Company’s stock
trades at a multiple of only 4.1 times earnings.
|
| · |
“In
a highly competitive industry, Crown Crafts’ small size puts it at a
significant disadvantage in winning customer shelf space and market
penetration.
The Company is reliant on its top three customers for
approximately 78% of its gross sales, and it remains dependent on the
sale of licensed products for 39% of its gross sales, which risks
substantial loss of revenue in the event it is unable to renew or
win new
licenses.
|
| · |
“The
Company’s share price declined approximately 33% from its February 2007
high over the past few months before rebounding somewhat after the
announcement of the intent to nominate the dissident’s nominees to the
Board. While
the Company completed a financial restructuring in 2006, that does
not
replace the need for improved operating performance and additional
measures. In fact, the Company appears to have only announced the
$6
million share repurchase program that Wynnefield had long championed
following the announcement that Wynnefield would conduct a proxy
campaign
to help effectuate such measures.
|
|
Third
Proxy Advisory Firm Recommends Shareholders Vote Wynnefield “Gold” Proxy
Card - cont’d
|
2
|
| · |
“The
dissidents have observed that the
current Board has failed to develop or implement a plan to systematically
grow the Company’s business
-
neither developing significant new products, improving market penetration
of existing products, nor making inroads with major new
customers. As
the Company's largest shareholder, it is reasonable that Wynnefield
should
be part of the development of a strategic plan for the
Company. Wynnefield
has recommended that the Company engage a recognized financial advisor
to
help identify and analyze appropriate strategy options.
|
| · |
“The
Company has a staggered board structure, which may serve to
entrench existing directors and management, rather than benefiting
stockholders” (emphasis added).
|
|
Lawrence E.
Dennedy
Daniel M.
Sullivan
MacKenzie
Partners, Inc.
105
Madison Avenue
New
York, NY 10016
Phone:
(800) 322-2885
|
or |
Nelson
Obus
The
Wynnefield Group
450
Seventh Avenue, Suite 509
Phone:
(212) 760-0134
|
|
Third
Proxy Advisory Firm Recommends Shareholders Vote Wynnefield “Gold” Proxy
Card - cont’d
|
3
|