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14a-12.
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.
NELSON
OBUS
JOSHUA
H.
LANDES
(Name
of
Person(s) Filing Proxy Statement if Other Than the Registrant)
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The
Wynnefield Capital
Group
Presentation
to
Institutional
Shareholder Services
July
26, 2007
Today’s
Agenda
Wynnefield
Capital Group – Who We
Are
Crown
Crafts Situation Analysis
Wynnefield’s
Action Plan
Summary
2
The
Wynnefield Capital
Group
Value
Investor in Small and
Micro-Cap
Stocks Since 1992
Stocks Since 1992
Long-term,
Patient Investors
Under-Followed,
Under-Recognized and
Under-Valued companies
Under-Valued companies
Minimal
Balance Sheet Risk
Potential
to Unlock Value Thru
Remedying
Problems
Problems
$450M
Invested
3
The
Wynnefield Capital
Group
Only
Take Actions that Benefit
Entire
Class of Investors
Class of Investors
Constructive
Approach Driven By
Dialogue
Adherence
to Best Practices
4
The
Wynnefield Capital
Group
Wynnefield
has Worked with Other
Companies to Successfully
Create Value
Create Value
Layne
Christensen Company- Worked
with the Company on their Capital
Allocation Process. Stock has increased from $9 to $44.
Allocation Process. Stock has increased from $9 to $44.
Cornell
Companies, Inc.- Worked to
Short-Circuit Attempted Private Equity
Buy-out. Stock Immediately Traded Over Deal Price.
Buy-out. Stock Immediately Traded Over Deal Price.
Supported
Negotiations (Through
Chairman of Compensation Committee)
which Led to Retention of CEO despite Loss of Deal
which Led to Retention of CEO despite Loss of Deal
Allied
Defense Group, Inc.- Granted
Board Seat in December 2006, Filled by
Frederick Wasserman
Frederick Wasserman
Wasserman
Instrumental in Focusing
Board and Management on
Impending Significant Financial Issues.
Impending Significant Financial Issues.
Hands-on
Involvement (at the request
of Management and the Board)
Played a Key Role in the Successful Negotiations with Note Holders,
Settling Default Claims and Re-financing the Company.
Played a Key Role in the Successful Negotiations with Note Holders,
Settling Default Claims and Re-financing the Company.
5
The
Wynnefield Capital
Group
In
Another Situation, First Aviation
Service, Inc. (“FAVS”)
Did Not Work With Wynnefield
Did Not Work With Wynnefield
ISS
Supported Wynnefield’s Position,
Despite Management’s
Locked-in Majority
Locked-in Majority
Wynnefield
was Unsuccessful, as Was
Inevitable Due to the Share
Ownership
Ownership
Wynnefield
undertook the campaign as
a matter of principle for the
benefit of all stockholders
benefit of all stockholders
Company
has Continued to Struggle
and has Now Filed to Go Dark
6
The
Wynnefield Capital
Group
Nelson
Obus
Wynnefield’s
Managing Partner Since
1992
45
Years Experience as a Value
Investor
20
Years Experience as a Textile
Industry Analyst
7
Frederick
Wasserman
Financial
and Management Consultant
Currently
serving on 6 Boards
31
Years of Experience with Middle
Market Companies
13
Years as a CPA
18
Years as CFO and President
Served
as Wynnefield’s Observer to
CRWS’s Board
8
Crown
Crafts Situation
Analysis
Wynnefield
first invested in Crown
Crafts in 1999
The
Largest
Shareholder, Currently owns >14%
of the stock
Wynnefield
has Been Very Supportive
of the Company and the Board to
Date,
Date,
Most
Notably, No Strings Attached
Support of Company’s Controversial Move to Re-
incorporate in Delaware from Georgia.
incorporate in Delaware from Georgia.
This
Move was Necessary if the
Company was to Increase the Number of Shares
Outstanding. The Increase in Shares was Needed to Support Warrants to be Issued to
the Company’s Banks.
Outstanding. The Increase in Shares was Needed to Support Warrants to be Issued to
the Company’s Banks.
Despite
Other Shareholders’
Concerns, Wynnefield Researched the Situation until
Confident that Management was Right and then Provided the support.
Confident that Management was Right and then Provided the support.
Wynnefield
Has Actively Pursued Full
Voting Board Representation over
Last Several Years, but has been offered only “Advisory Observer” status.
Last Several Years, but has been offered only “Advisory Observer” status.
9
Crown
Crafts Situation
Analysis
“Past
Performance is not Necessarily
Indicative of Future Results”
Management
has Been Able to
Financially Stabilize the Balance Sheet over
the Last Several Years
the Last Several Years
Refinancing
Transaction that
Resulted in Significant Increase in Equity Value
Continual
Improvement in Sourcing
Cost
Cutting Efforts
Decision
to Close Churchill Weavers
However,
They Have Not Been Able to
Address Other Critical Areas
Not
in Sales and Marketing
Not
Strategic in Nature
Capital
Structure-Related
Initiatives Now In Place Have Been Urged By Wynnefield
Over Last Several Years
Over Last Several Years
10
Crown
Crafts Situation
Analysis
Crown
Crafts is Now at a Crossroads
Growth
Potential without Revenue
Momentum is Limited,
despite the Company’s Operational Expertise
despite the Company’s Operational Expertise
The
Entire Industry’s Dependence on
a Limited Number of
Retailers Eliminates the Company’s Leverage
Retailers Eliminates the Company’s Leverage
Company
is Vulnerable to Larger
Competitors
Without
Forward Momentum, the Stock
Valuation is
Vulnerable to Any Operational Setback
Vulnerable to Any Operational Setback
See
Recall of Baby Bibs Earlier This
Year
Financially
Immaterial; Valuation Drop Significant
11
Crown
Crafts Situation
Analysis
Company
Operates in a Very
Challenging
Environment
Environment
Large
Competitors
Overly
Reliant on 3 Customers
Customer
Base is Capable of Vertical
Integration
Dependent
on Licensed Properties
Gross
Margins are Very
Tight
12
Crown
Crafts Situation
Analysis
Challenging
Environment has led to
Declining
Sales over 7 Year Period
Stagnant
Operating Income
13
Crown
Crafts Situation
Analysis
At
This Crossroads, Crown Crafts
Requires a
Long Term Strategic Approach to its Challenges
Long Term Strategic Approach to its Challenges
Tactics
will Only Carry the Company
to a Certain Point
Financial
Engineering and Cost
Cutting cannot Replace
Revenue Growth
Revenue Growth
The
Board as Currently Comprised has
Not Provided the
Vision Necessary to Generate Such a Plan or the Leadership
to Insist Management Provide that Vision
Vision Necessary to Generate Such a Plan or the Leadership
to Insist Management Provide that Vision
14
Crown
Crafts Situation
Analysis
Company
has a Thin Management Team
and is Very Dependent on President/CEO
and is Very Dependent on President/CEO
Sales
Sourcing
Licensing
Banking
relationship
Investment
community
No
Announced Succession Plan
15
Crown
Crafts Situation
Analysis
Wynnefield
believes Good Corporate
Governance Practices Create
and Protect Shareholder Value
and Protect Shareholder Value
Directors’
Compensation
is Paid over
96% Cash, with Only a
Minimal Option Position, Dramatically Out of Line with Current Best
Practices
Minimal Option Position, Dramatically Out of Line with Current Best
Practices
Corporate
Governance Issues Have
Resulted in a CGQ of 2 and a
CGQ in Comparison to its Peers of 17.1%
CGQ in Comparison to its Peers of 17.1%
No
Nominating Committee
Affiliated
Director on Compensation
Committee
Staggered
Board Structure
Dual
CEO/Chairman, without Lead
Director
No
Governance Committee
16
Crown
Crafts Situation
Analysis
Result
Issues
have led to
33%
decline in Stock Price from
February
Exceptionally
low EV to EBITDA Ratio
Compared to
Peers and Market
Peers and Market
17
Crown
Crafts Situation
Analysis
Despite
The Situation, the Current
Board has
Not
Insisted on a Succession Plan
Not
Instituted a Stock Buy Back Plan
until Proxy Fight Began
Not
Aggressively Monitored Updated
Corporate Governance
Practices
Practices
Allowed
the Company to Operate
without a Long Term
Strategy
Strategy
Not
Hired Financial Advisors to Help
Create Shareholder
Value
Value
18
Crown
Crafts Situation
Analysis
Can
this Board Objectively Consider
All Alternatives
When Their Positions are Enhanced by the Status Quo?
When Their Positions are Enhanced by the Status Quo?
Other
than Mr. Chestnut, No Director
has Material Stock Holdings.
This Creates Doubt that the Board is Aligned with Stockholder’
Interests. With the Status Quo, They Continue to receive
Substantial Director’s Fees in Cash
This Creates Doubt that the Board is Aligned with Stockholder’
Interests. With the Status Quo, They Continue to receive
Substantial Director’s Fees in Cash
A
Substantial Number of Mr.
Chestnut’s Shares were earned, not
purchased. This Creates the Same Doubt as to His Approach as
Compared to the Shareholders’ Perspective. The Status Quo
Allows Him to Accumulate More Shares and Earn Salary and
Bonuses.
purchased. This Creates the Same Doubt as to His Approach as
Compared to the Shareholders’ Perspective. The Status Quo
Allows Him to Accumulate More Shares and Earn Salary and
Bonuses.
Steve
Fox Continues to Earn Legal
Fees
19
Wynnefield’s
Action
Plan
Wynnefield
Wants to Ensure
Development
and Implementation of
Corporate Governance
Best Practices, including Elimination of the Staggered Board
Best Practices, including Elimination of the Staggered Board
Complete
and Correct Information is
Available to All
Shareholders
Shareholders
The
Shareholders’ Perspective is
Prominent in the Company’s
Long Term Planning
Long Term Planning
That
by Working in Cooperation with
the Other Board Members,
the Company’s Long Term Value (Which the Market is not
Yielding) is Realized by Its Owners
the Company’s Long Term Value (Which the Market is not
Yielding) is Realized by Its Owners
20
Wynnefield’s
Action
Plan
Wynnefield
Does Not Want to
Sell
the Company, unless This is the
Best
Alternative after an Complete Analysis is
Performed
Alternative after an Complete Analysis is
Performed
Control
the Board of Directors
Undermine
the Board or the
CEO
21
The
Company’s Response
Rather
than Addressing the Strategic
and
Governance Shortcomings that have Stalled the
Company, Their Responses to Wynnefield’s
Questions were:
Governance Shortcomings that have Stalled the
Company, Their Responses to Wynnefield’s
Questions were:
Obus
is Subject to an SEC lawsuit
Wynnefield
has a Short-Sighted,
Self-Serving Agenda
Wasserman
Takes His Direction From
Wynnefield and Obus
Belatedly
adopting some of the
measures that Wynnefield
has long advocated
has long advocated
22
Wynnefield’s
Action
Plan
To
Unlock Value For Shareholders We
Will:
Address
Poor Corporate Governance
Practices
Retain
Financial Advisor To Help
Identify / Analyze Strategic
Options
Options
Develop
Strategic Plan for CRWS
Ensure
Effective Execution of Plan
by Management
23
Wynnefield’s
Action
Plan
In
Order to Achieve Our Goals,
Wynnefield
has nominated 2 Candidates for Election
to the Board
has nominated 2 Candidates for Election
to the Board
Nelson
Obus
Frederick
Wasserman
Wynnefield
also Supports the
Re-Election
of Mr. Chestnut to the Board
of Mr. Chestnut to the Board
24
Summary
As
CRWS’ Largest Shareholder, Our
Interests are Directly Aligned
with All Shareholders. We only Make Money When They Do.
with All Shareholders. We only Make Money When They Do.
Wynnefield
Believes Crown Crafts is
at a Crossroads, facing a
Challenging Environment with Less Resources than its Competitors
Challenging Environment with Less Resources than its Competitors
Crown
Crafts Arrives at this
Crossroads with Declining Revenues
and a Depressed Stock Valuation.
and a Depressed Stock Valuation.
The
Board as Currently Comprised Has
Failed the Company and its
Shareholders by Allowing Poor Corporate Governance Practices,
Not Having a Properly Researched and Implemented Capital
Allocation Plan or a Management Succession Plan in Place
Shareholders by Allowing Poor Corporate Governance Practices,
Not Having a Properly Researched and Implemented Capital
Allocation Plan or a Management Succession Plan in Place
25
Summary
It
is Imperative that the Company
Develop and Implement a Long Term
Plan to Unlock Shareholder Value, with All Options Considered
Plan to Unlock Shareholder Value, with All Options Considered
The
Board as Currently Comprised
Does Not Include a Director who Shares
the Stockholders’ Perspective as to the Long Term Future of the Company
the Stockholders’ Perspective as to the Long Term Future of the Company
Wynnefield
is a Long-time and By Far
Largest Stockholder in the Company,
Owning More than 14% of the Shares and has a History of Working with
Boards of Other Companies to Increase Stockholder Value
Owning More than 14% of the Shares and has a History of Working with
Boards of Other Companies to Increase Stockholder Value
Wynnefield
Believes that Obus and
Wasserman have the Skills, Experience
and Perspective to Significantly Increase the Company’s Value.
and Perspective to Significantly Increase the Company’s Value.
26