Crown Crafts, Inc. (NASDAQ:CRWS) Q4 2019 Earnings Conference Call June 13, 2019 2:00 PM ET
Randall Chestnut - Chairman, President and Chief Executive Officer
Olivia Elliott - Vice President and Chief Financial Officer
- Randall Chestnut - 董事长，总裁兼首席执行官
- Olivia Elliott - 副总裁兼首席财务官
Cindy Ding - D.A. Davidson
Josh Peters - Zenith Sterling Advisers
Ralph Marash - First Manhattan Company
- Cindy Ding - D.A.戴维森
- Josh Peters - Zenith Sterling Advisers
- 拉尔夫马拉什 - 第一曼哈顿公司
Hello, ladies and gentlemen and welcome to the Crown Crafts, Inc. Investors Conference Call. Your host for today’s call is Mr. Randall Chestnut, Chairman, President and Chief Executive Officer. [Operator Instructions] Any reproduction of this call in whole or in part is not permitted without prior written authorization from Crown Crafts, Inc. As a reminder, this conference is being recorded today, June 13, 2019. And at this time, I would now like to turn the call over to Ms. Olivia Elliott, Vice President and CFO who will begin the call. Please proceed.
您好，女士们，先生们，欢迎来到Crown Crafts，Inc。投资者电话会议。 今天召开的主持人是Randall Chestnut先生，董事长，总裁兼首席执行官。 [操作员说明]未经Crown Crafts，Inc。事先书面授权，不得全部或部分复制本次电话。提醒一下，本次会议将于2019年6月13日进行记录。此时，我会 现在想把这个电话转给负责电话会议的副总裁兼首席财务官Olivia Elliott女士。 请继续
Thank you. Welcome to the Crown Crafts investor conference call for the fourth quarter and full fiscal year 2019. With me today is Randall Chestnut, the company’s President and Chief Executive Officer.
谢谢。 欢迎参加第四季度和2019财年的Crown Crafts投资者电话会议。今天与我同在的是公司总裁兼首席执行官Randall Chestnut。
A telephone replay of the call will be available 1 hour after the end of the call through 4:00 p.m. Central Time on June 20, 2019. A web replay of the call will be available for 90 days and can be accessed by visiting our website at www.crowncrafts.com.
Before we begin, I would like to remind listeners of the cautionary language regarding forward-looking statements contained in the press release. That same language applies to comments made in today’s conference call. Also in regard to comments made in today’s conference call that are related to the company’s recently announced dividend, its history of paying dividends and the annualized yield on the company’s common stock. We remind listeners that the declaration of each dividend is at the discretion of the company’s Board of Directors and the company expressly disclaims any assurances as to the frequency and amount of any future dividend.
I will now turn the call over to Randall.
在开始之前，我想提醒听众关于新闻稿中包含的前瞻性陈述的警示语。 同样的语言适用于今天电话会议上的评论。 此外，关于今天电话会议上发表的评论，这些评论与公司最近公布的股息，支付股息的历史以及公司普通股的年化收益率有关。 我们提醒听众，每项股息的声明均由公司董事会酌情决定，公司明确表示不保证任何未来股息的频率和金额。
Olivia, thank you and good afternoon again to everyone. Before the market opened this morning, we released our press release for the fourth quarter and full year of FY ’19 ending March 31 of this year 2019. I will touch on the numbers for the quarter and the year, a few comments and Olivia will come back with more detail.
Net sales for the quarter in the current year were $21,717,000 as opposed to $22,686,000 in the same quarter last year are down $969,000 or 4.3%. Net income for FY ‘19 was $1,392,000 as opposed to $1,247,000 in the same quarter last year, or up $145,000 or 11.6%. Diluted earnings per share in the current year were $0.14 as opposed to $0.12 last year same quarter.
Turning to the full year, net sales for the full year were $76,381,000 as opposed to last year FY ‘18 of $70,270,000 or up $6,111,000 or 8.7%. Net income for FY ‘19 was $5,019,000 as opposed to FY ‘18 of $3,021,000 or up $1,998,000 or 66.1%. Diluted earnings per share for the current year were $0.50 and in the previous year FY ‘18 were $0.30. As we began FY ‘19 we were dealing with some very difficult market conditions. Late in fiscal 2018, our second largest customer went into liquidation. Not only did we lose a large customer, we also had to deal with a tremendous amount of merchandise that flooded the market as in essence they became one of our competitors. We began the year looking for new customers to replace this huge hold.
Over the course of the year, FY ‘19, we recovered nicely. We finished the year with an 8.7% increase in net sales. We also finished the year with a 66.1% increase in net income. Of course, this was helped by not having numerous non-recurring charges to repeat in the current year. Most of which were related to the bankruptcy and subsequent liquidation of our second largest customer. Gross profit as a percent of net sales for the quarter increased from 25.9% in the prior year to 28.6% in the current year. Gross profit as a percent of net sales for the year increased from 28.1% in the prior year to 29.2% in the current year. We finished strong and we are proud of the efforts of all of our staff. Fiscal ‘19 was a good year.
Turning to the dividends on May 13 of this year we announced a quarterly dividend of $0.08 per share. This represents a 6.67% annualized yield based on yesterday’s closing price per share of the company’s common stock. This quarterly dividend will be paid July 5, 2019 to shareholders of record on June 14, 2019. It was a very challenge – in this very challenging year we actually returned $3.2 million in cash to the shareholders, which was a tremendous feat. We are proud of the track record. We continue to operate the business in a manner that generates very strong cash flow and delivers substantial value to our shareholders.
Olivia, I will turn it back to you for comments.
谈到全年，全年净销售额为76,381,000美元，而去年同期为70,270,000美元或上涨6,111,000美元或8.7％。 19财年的净收入为5,019,000美元，而18财年为3,021,000美元或上涨1,998,000美元或66.1％。本年度每股摊薄收益为0.50美元，而去年同期为0.30美元。在我们从19财年开始，我们处理了一些非常困难的市场条件。 2018财年末，我们的第二大客户进入清算阶段。我们不仅失去了大客户，还不得不处理大量涌入市场的商品，因为它们本质上成为我们的竞争对手之一。今年我们开始寻找新客户来取代这个巨大的控股。
谈到今年5月13日的股息，我们宣布了每股0.08美元的季度股息。根据昨天公司普通股的每股收盘价计算，这代表了6.67％的年化收益率。该季度股息将于2019年7月5日支付给2019年6月14日的股东。这是一个非常大的挑战 - 在这个充满挑战的一年里，我们实际向股东返还了320万美元现金，这是一项巨大的成就。我们为此业绩感到自豪。我们继续以可产生强劲现金流的方式经营业务，并为股东带来可观的价值。
Thank you. I am only going to give financial highlights. For more details, please refer to the company’s Form 10-K filed with the Securities and Exchange Commission this morning.
Net sales were $21.7 million for the fourth quarter of fiscal 2019, down $969,000 or 4.3% from prior year sales of $22.7 million. For the year, net sales were $76.4 million for fiscal 2019, up $6.1 million or 8.7% from $70.3 million in the prior year. The increase in sales for the year is primarily due to sales that resulted from the acquisitions of Sassy and Carousel during fiscal 2018. Sassy sales were $11.8 million in fiscal 2019 compared to $2.1 million in fiscal 2018. Carousel sales were $6.5 million in fiscal 2019 compared to $5.4 million in the prior year. These increased sales were partially offset by the elimination of Toys R Us, Babies R Us, which amounted to $9.7 million during the prior year.
Gross profit increased by $326,000 and was 28.6% of net sales for the current year quarter compared with the prior year quarter gross profit of 25.9% of net sales. Gross profit increased by $2.5 million and increased from 28.1% of net sales for fiscal 2018 to 29.2% of net sales for the current year. The increase is primarily due to the net higher sales levels in the current year. In addition, sales in the current year were made at overall higher gross profit percentages and sales to Toys R Us, Babies R Us during the prior year leading up to and continuing through their bankruptcy and liquidation resulted in a shift for less profitable product mix and shortfalls of minimum guarantee royalties in the prior year.
Marketing and administrative expenses increased by $922,000 for fiscal 2019 compared with fiscal 2018. Contributing to this increase is $3.1 million in cost incurred during the current year that were associated with Carousel compared with $2.6 million in such costs during the prior year, which included $347,000 in acquisition costs. Cost in the current year also included $210,000 in charges associated with transferring most of the Sassy inventory from Grand Rapids, Michigan to the company’s distribution facility in Compton, California. Offsetting the increase in the current year is the elimination of credit coverage fee of $653,000 and a bad debt charge of $218,000 that occurred in the prior year that were associated with the bankruptcy and liquidation of Toys R Us.
The current year provision for income taxes is based upon an annual effective tax rate from continuing operations of 24.4% compared to the prior year rate of 32.7%. Tax legislation enacted in 2017 included a provision to lower the federal corporate income tax rate from 34% to 21% effective as of January 1, 2018. As the company’s fiscal year 2018 ended on April 1, 2018, the lower corporate income tax rate was phased in resulting in a blended federal statutory rate of 30.75% for fiscal year 2018. The company provides for deferred income taxes based on the difference between the financial statement and tax basis of the company’s assets and liabilities.
The company’s net deferred income tax assets had previously been recorded based upon the enacted composite federal state and foreign income tax rate of approximately 37.5%. That would have been applied as the financial statement tax differences began to revert. Because these differences are now expected to reverse at a composite rate of approximately 24.5%, the company was required to revalue its net deferred income tax assets. This revaluation resulted in a discrete charged income tax expense of $377,000 during fiscal 2018. Additionally, the company’s measurement regarding the tax impact of certain state apportionment percentages are measured net of federal income tax. The company also revalued its reserve for unrecognized tax liabilities, which resulted in a net discrete charge to income tax expense of $120,000 during fiscal 2018.
During both fiscal 2019 and 2018, the company recorded discrete entries associated with excess tax benefits or charges arising from the vesting of non-vested stock during the period and also recorded reserves for unrecognized tax liability. The effective tax rate from continuing operations combined with discrete income tax charges and benefits resulted in an overall provision for income taxes of 26.1% for the current year and 44.3% for the prior year.
Net income for the fourth quarter of fiscal 2019 was $1.4 million or $0.14 per diluted share compared with net income of $1.2 million or $0.12 per diluted share in the fourth quarter of fiscal 2018. Net income for fiscal 2019 was $5 million or $0.50 per diluted share compared with net income of $3 million or $0.30 per diluted share for fiscal 2018.
I will now return the call to Randall.
Olivia, thank you very much and that concludes our remarks. And now Ian, if you come back we can open it up to any questions that anyone on the line may have.
[Operator Instructions] Our first question comes from Linda Bolton-Weiser from D.A. Davidson. Linda, please proceed.
[操作员说明]我们的第一个问题来自D.A.的Linda Bolton-Weiser。戴维森。 琳达，请继续。
Hello. Hi, Randall. Hi, Olivia? This is Cindy Ding on for Linda. Thanks for taking our questions. So, our first question is can we expect modest sales growth in fiscal ‘20 and what you see as the key drivers of growth? Thanks.
你好。 嗨，兰德尔。 嗨，奥利维亚？ 对于Linda来说，这是Cindy Ding。 谢谢你提出我们的问题。 那么，我们的第一个问题是，我们可以预期在20财年的销售增长适度以及您认为增长的主要推动因素是什么？ 谢谢。
Okay. I am sorry I didn’t quite get the question. It was a little blurred.
好的。 对不起，我没有得到这个问题。 它有点模糊。
I am sorry, let me repeat the question. So can we expect modest sales growth in fiscal ‘20 and what do you see as the key drivers of growth?
Okay. And I know you are not Linda, so your name is, what’s your name?
Hi, this is Cindy on for Linda.
Cindy, okay. Hey, Cindy. We spoke with Linda earlier and she told me you were going to be on. The drivers for the growth is and we are working diligently to do this is developing new products. And it’s not just new product within the categories that we currently participate in, it would be products – developing products in adjacent categories to the infant and toddler businesses that we are in, okay. And we are doing that as rapidly as we possibly can. We have nothing today to announce, but we accept that we are working towards that end.
辛迪，好的。 嘿，辛迪。 我们早些时候和琳达交谈过，她告诉我你将会继续。 增长的驱动力是，我们正在努力做到这一点正在开发新产品。 它不仅仅是我们目前参与的类别中的新产品，而是产品 - 为我们所在的婴幼儿企业开发相邻类别的产品，没关系。 而且我们正在尽可能快地做到这一点。 我们今天没有任何消息要宣布，但我们接受我们正在为此而努力。
Great. And our second question is your cash flow was really strong in fiscal ‘19 and do you expect a similar level in fiscal ‘20?
Well, I mean the best way I can answer the cash flow is yes, it was very strong and you have got to look back for the last 15 to 17 years and our cash flow has been strong over the last 15 to 17 years, as the market adjust, as situations occur, i.e., bankruptcy, liquidation of major customers, we adjust our business to compensate for that and to protect the cash flow. So our cash flow if you look back over almost 20 years has been very, very, very strong. So we see no reason to believe that we cannot continue there. We are very low debt. We have considerable amount of borrowing availability. And so therefore, we think from the balance sheet side we are healthy.
好吧，我的意思是我可以回答现金流的最佳方式是，非常强大，你必须回顾过去15到17年，我们的现金流在过去的15到17年里一直很强劲， 市场调整，在情况发生时，即破产，清算主要客户，我们调整业务以弥补这一点并保护现金流。 因此，如果你回顾近20年来我们的现金流非常，非常非常强大。 所以我们认为没有理由相信我们不能继续那里。 我们的债务很低。 我们有相当数量的借款可用性。 因此，我们从资产负债表来看，我们是健康的。
Thanks. And then are you actually looking for potential acquisitions and has the Babies R Us liquidation created any opportunities?
谢谢。 那么你真的在寻找潜在的收购并且Babies R Us清算是否创造了任何机会？
The answer to that is to both of those is yes, we think that the Babies R Us situation has created some opportunities. And yes, we are always looking for additional acquisitions that would complement the product categories and the subsidiaries that we are in. So that’s an ongoing active conversation.
答案是两者都是肯定的，我们认为Babies R Us的情况已经创造了一些机会。 是的，我们一直在寻找额外的收购，以补充我们所处的产品类别和子公司。因此，这是一个持续的积极对话。
Okay. And how will you manage through the impacts of the 25% tariffs if they go through?
That’s a good question. And we will address it in the following manner and we believe that most of our competitors are going to take the same approach is – our margins are not strong enough to support us absorbing a 25% tariff increase. We have had very minimal impact through rounds 1, 2 and 3 and we have passed those on to our customers. And without exception, put that in manner, don’t get me wrong, they haven’t been large numbers, but in every case the customer accepted it sometime not quite as quick as others did, but they did accept the price increase with one small exception where customer discontinued the product, but as we learned, they have intended to discontinue it anyway for performance reasons. So our philosophy is we are going to pass it on and we are going to pass it on to the consumer – to our customers and we think the retailers are going to pass it on to the ultimate consumer. And I applaud a couple of – one in particular, the large retailer who has gone public and said we will pass it on and it’s going to be passed on ultimately to the consumer. So we can’t absorb it, we are going to pass it on. The timing we don’t know for sure when that will be, but it’s anticipated that it will be sometime in July if it occurs.
这是个好问题。我们将以下列方式解决这个问题，我们认为大多数竞争对手都会采用相同的方法 - 我们的利润率不足以支持我们吸收25％的关税增长。通过第1,2和3轮我们的影响非常小，我们已经将这些影响传递给了我们的客户。毫无例外地，把它放在一边，不要误会我的意思，它们并不是大数字，但在每种情况下，客户接受它的时间并不像其他人那么快，但他们确实接受了价格上涨客户停止使用该产品的小例外情况，但据我们了解，出于性能原因，他们仍打算停止使用该产品。因此，我们的理念是，我们将继续传承它，我们将把它传递给消费者 - 我们的客户，我们认为零售商将把它传递给最终的消费者。我赞赏了一些 - 特别是一家大型零售商，他已经上市并表示我们会将其传递下去，并最终传递给消费者。所以我们无法吸收它，我们将把它传递下去。我们不知道什么时候会确定的时间，但预计如果它发生的话，它将在七月的某个时间。
Okay, great. And we have a follow-up to the previous question do you think demand for your products will be impacted by the tariff related price increases?
That’s hard to say. Okay, we don’t know the answer to that question. It could have an effect, but we have learned over the many, many years that if there is discretionary spending in the family that the baby, the infant, who is our market, infant and toddler are not going to be effective as the family has to cut the budget as maybe some of the older kids or the parents, i.e., the father may wear shoes with holes on the bottom still, but they are going to try to provide for the new born baby. So we are hoping that, that still takes place. Will there be some downshifting to less expensive product? Could be, we don’t know, okay. We have never been through rough seas like this, where there is a 25% increase in one pair of sports. And so we just have to see how it happens.
这很难说。 好的，我们不知道这个问题的答案。 它可能会产生影响，但我们已经了解多年，如果在家庭中有可自由支配的开支，婴儿，婴儿，我们的市场，婴儿和幼儿都不会像家庭一样有效。 可能会像一些年龄较大的孩子或父母一样削减预算，也就是说，父亲可能会穿鞋底有洞，但他们会尝试为新生婴儿提供服务。 所以我们希望，这仍然存在。 对于较便宜的产品会有一些降价吗？ 可能，我们不知道，好吧。 我们从未经历过这样的波涛汹涌的大海，其中一对运动增加了25％。 所以我们只需看看它是如何发生的。
Okay, thank you very much. That’s all of my questions.
Thank you. Have a good day.
Our next question comes from Justin Putnam of [indiscernible]. Justin, please proceed.
Great. I just had a more quick follow up on the impact on the tariff and you are pretty clear that you are going to pass price increases along. And I was curious to know if there are any opportunities for you to improve the pricing for your suppliesyou’re your negotiations for your suppliers?
非常好。 我只是对关税的影响进行了更快速的跟进，你很清楚你将要通过价格上涨。 我很想知道您是否有机会提高供应品的价格，您的供应商谈判是否合适？
I mean just there might be a little, but there is no enough to offset a 25% price increase I can assure you. As you may have noticed, the exchange rate between the RMB versus the dollar has gotten, the RMB has gotten less exchange rate is going up. So, there maybe a point in the future if it keeps going up, it’s in the low 6 90s or something as of today. If it keeps going up and gets above 7, there is an opportunity to go back to the vendors and shave a little off, but it’s nowhere near what the cost of the tariffs are going to be.
我的意思是可能会有一点点，但是没有足够的价格抵消我可以向你保证的25％的价格上涨。 您可能已经注意到，人民币兑美元之间的汇率已经上升，人民币兑换率已经下降。 所以，如果它继续上升，它可能会在未来有一个点，它在今天的低点6 90s或者什么东西。 如果它继续上升并超过7，那么就有机会回到供应商并削减一点点，但它远不及关税的成本。
Okay, great. Next question there is on a year-over-year basis for the fiscal fourth quarter, it looked like your Carousel and Sassy numbers for the quarter went to kind of different directions with Carousel being down maybe 40% year-over-year and Sassy being up somewhere around 50% for the quarter. I was just curious what impact may have been in the quarter, but more importantly what kind of your outlook is going forward?
Well, the Hamco Sassy business, this – we purchased Sassy in December ‘17 so we didn’t get the full benefit that first year, we only got 4 months or 3.5 months of effective Sassy, but this past year we had the full 12 months effect. So that did help.
好吧，Hamco Sassy的业务，这个 - 我们在17年12月购买了Sassy，所以我们没有得到第一年的全部好处，我们只有4个月或3.5个月的有效Sassy，但是在过去的一年里我们有了全部12个 月影响。 这确实有帮助。
No, I am talking about quarter-over-quarter sorry?
Okay. The quarter to quarter, I mean, it’s hard to say quarter-to-quarter it could be one order that got moved up or one order that got delayed, okay and that could happen the last day of the month, where a truck doesn’t pickup and it shifts at one quarter to the next. So it’s sort of hard to analyze a business based on one quarter to one quarter.
好的。 季度到季度，我的意思是，很难说季度和季度可能是一个订单上升或一个订单延迟，好吧，这可能发生在本月的最后一天，卡车没有 拾取并在四分之一转移到下一个。 因此，基于四分之一到四分之一的业务分析是很困难的。
Okay. Then so for fiscal 2019 actually was $11.8 million, I think, is that a good annual run-rate for that business or has there been a changes in the expectations for that one?
We don’t make forward-looking predictions, but I mean it’s a solid business and we think that it’s going to continue to be solid for the future. We are very pleased with that acquisition.
And the same question for Carousel is there anything unusual in business this year and let me put it that way?
Anything unusual in the Carousel business coming up for 2020.
Yes, we are changing a few things that we are just not at liberty to say as we speak, but we are changing a few things at Carousel to expand their sales opportunity. And we think that’s going to payoff in 2020 some new channels of distribution etcetera.
Okay. Last question there and Olivia, this might be more for you then, CapEx for 2020 was up little bit in 2019, I am just curious to know if there was any change in 2020 in CapEx?
The reason that it’s up is the Sassy acquisitions for the toys. Toys include moulds, etcetera, for the manufacturing process that we put those on the books of fixed assets. So that’s the reason for the increase and with that business being a good business, I would expect that to continue to be that – pretty close to the rate.
它的成功之处在于Sassy对玩具的收购。 玩具包括模具等，用于制造过程，我们把它们放在固定资产的账簿上。 因此，这是增加的原因，并且该业务是一个好的业务，我希望继续这样 - 非常接近利率。
Okay. So maybe it’s got back going forward more in the $700,000 range there?
I would think it’s going to be closer to what it ran in 2019 than the previous numbers from prior fiscal years.
Okay, thank you. Thank you for taking my questions.
At this time, our next question comes from Josh Peters of Zenith Sterling Advisers. Josh, please proceed.
在这个时候，我们的下一个问题来自Zenith Sterling Advisers的Josh Peters。 乔希，请继续。
Hello. Congratulations on quite a year here. I agree quite a good job coming back from – I actually wanted to drill in just a little bit more on that thinking about the disruptions that you faced especially in the first couple of quarters of fiscal ‘19 were easy to say not only have you lost Toys R Us as a customer, but that inventory had become a competitor of the own shipment, does that create an opportunity to have something found new outlets for your products here going into fiscal 2020?
你好。 祝贺这里有一年的时间。 我同意回来的工作非常好 - 我实际上想再多花一点时间考虑你所面临的中断，特别是在19财政年度的前几个季度，这很容易说你不仅丢失了 玩具反斗城作为客户，但该库存已成为自己的货物的竞争对手，这是否创造了一个机会，让您的产品在2020财年找到新的商店？
Well, I mean, Josh, thank you for the kind remarks, but now it really doesn’t. The Toys R Us has reemerged as a new company, but it’s really they don’t have any storefronts for any sales in the U.S. it is really a licensing business. So the business that Toys R Us, Babies R Us add has been spread out to a number of retailers that we had before, including Wal-Mart, Amazon, Target, Buy Buy Baby and the list goes on. So there is not like a big huge opportunity to sell into that. It is the same customers that just – they are picking up the bits and pieces and there is no one retailer that stepped up and took it up. So, it’s sort of spread out and it was a tough thing to overcome the loss of our second largest customer.
好吧，我的意思是，乔希，谢谢你的善意评论，但现在却没有。 Toys R Us已经重新成为一家新公司，但实际上他们在美国的任何销售都没有任何店面，这实际上是一项许可业务。 因此，Toys R Us，Babies R Us添加的业务已经分散到我们之前的许多零售商，包括沃尔玛，亚马逊，Target，Buy Buy Baby等等。 因此，没有一个巨大的机会可以卖出。 它只是同样的客户 - 他们正在捡起零碎的东西，而且没有一家零售商加紧并把它拿走了。 因此，它有点分散，克服我们第二大客户的损失是一件艰难的事情。
Okay. So at this point you feel like things have kind of sorted themselves out in terms of market share between the different retail partners that you have?
We sure hope so. We think they have yes, but we sure hope so.
Well, I know in the absence of guidance for this year, I think it would be kind of helpful to get a sense if you are even just lapping some easy comparisons in the year ago period, because that’s kind of what it would look like to me, but I don’t have a feel for how much that business really shifted?
Well. And again, we don’t give guidance and we stand pretty firm on that, but what we can tell you is we are out everyday beating the bushes for every possible order that it exists.
Okay. And the other question I want to touch on I think it’s interesting that you consider looking at other acquisitions, what would be your position in terms of your willingness to borrow in order to finance that, is there a feeling on how much leverage you would be willing to be put on the balance sheet in order to finance transactions?
好的。 我想谈谈的另一个问题我认为有趣的是，你考虑看其他收购，你愿意借贷以便为其提供资金的立场是什么，是否有一种感觉，你会有多大的杠杆作用 是否愿意将其纳入资产负债表以便为交易融资？
Yes, there is. I mean, Josh, we are not going to go crazy. I mean, we have had huge debt before and we don’t want to have huge debt again. So any acquisitions we do, yes, we would borrow and we proved it. We did require to do the Sassy acquisition a year and a half ago. So, we are not careful to borrow money and our bank is supportive of us doing that to borrow money, to do acquisitions, but we are not going to go out and runoff a huge, huge debt beyond what we are capable of service.
就在这里。 我的意思是，乔希，我们不会发疯。 我的意思是，我们之前有过巨额债务，我们不想再次承担巨额债务。 所以我们做的任何收购，是的，我们会借用，我们证明了这一点。 我们确实要求在一年半前完成Sassy的收购。 因此，我们不小心借钱，而我们的银行支持我们这样做以借钱，进行收购，但我们不会出去并且超出我们能够服务的巨额巨额债务。
Okay, great. And within that framework and I am assuming that the dividend remains the priority for shareholder returns?
Well, again let me say that dividends are approved quarterly by the board. There is no guarantee that they will be done, but again you got to look in the rearview mirror and we have been doing it now since 2010. So, that’s the best answer I can give you on the future of dividends.
Well, I do appreciate the commentary and thanks again.
Thank you, Josh. You are quite welcome.
[Operator Instructions] At this time, our next question will be coming from Ralph Marash of First Manhattan Company. Ralph, please proceed.
[操作员说明]此时，我们的下一个问题将来自First Manhattan Company的Ralph Marash。 拉尔夫，请继续。
Good afternoon, Olivia and Randall.
Hello. How are you?
Hello, how are you?
Okay. How are you?
Good. I had follow-up on tariffs, are you exploring any alternative sourcing manufacturing sites away from China?
Ralph, we have and we have looked in a number of countries and we have done sample costings out of at least a half dozen different countries. And it’s very difficult to find a country that can do it competitive with China. And like in some countries they don’t have the fabric available, the woven fabric, there is knits available on a lot of different countries, but we don’t do a lot of mix. So in the woven category, there is not a whole lot and they have to go back and rely on China to get the fabric. So you have to bring the fabric from China and to whatever country and by the time you do that, the cost is in all cases that we run into so far is in excess of 25%. For instance, there is one basic fabric that we use for a lot of our products and it’s not produced outside of China and it’s got to come from China. So – and when you move that fabric from one country to the other, you are adding cost to it and freight, etcetera, so the savings you get doesn’t really help you and in most cases, it’s equal to or more than the tariffs that are in place. So, we think that we are going to have to bite the bullet, pass it on.
拉尔夫，我们已经和我们在一些国家进行了调查，我们已经从至少六个不同的国家进行了样本成本计算。找到一个可以与中国竞争的国家是非常困难的。就像在一些国家，他们没有可用的面料，织物，在很多不同的国家都有针织物，但我们没有做很多混合。所以在编织类别中，没有很多东西，他们必须回过头来依靠中国来获得面料。因此，您必须将面料从中国带到任何国家，当您这样做时，我们遇到的所有情况下的成本都超过了25％。例如，我们为很多产品使用了一种基本面料，它不是在中国以外生产的，而是来自中国。所以 - 当你将面料从一个国家转移到另一个国家时，你会增加成本和运费等等，所以你得到的节省并没有真正帮助你，在大多数情况下，它等于或超过关税到位了。因此，我们认为我们必须咬紧牙关，传递它。
Thanks. I am sorry I cut you off.
We have looked, I promised.
Thanks. For Carousel, is all of their products U.S. made?
At this point, Ralph, it’s all U.S. made. We do some products of imported fabric, that’s imported within its imported fabric and then printed at Carousel and then all made in U.S. Yes, at this point, it’s all U.S. made.
And I am assuming given Carousel’s go-to-market and their niche in the market they have, they can absorb that cost structure, but the rest of the company’s products couldn’t absorb domestic manufacturing?
The rest of the company’s products going….
The rest of the Crown Craft’s products, yes.
The rest of our business going to customers like Wal-Mart, Target and Amazon quite candidly, no, they cannot absorb the cost it would be to make that product in the U.S.
Okay, thanks a lot.
You are quite welcome. Thank you.
This concludes our question-and-answer session. I would like to turn the conference over back to Randall Chestnut for any closing remarks.
这就是我们的问答环节。 我想把会议转回Randall Chestnut的任何结束语。
Ian, thank you very much and thanks to everyone who participated on the call today. And just a couple of closing remarks, management remains very optimistic about the future of our business. We are pleased with our position in the market. Our staff has done a remarkable job of rebuilding after the demise of Babies R Us and the ultimate liquidation of Babies R Us. We would like to thank all of our customers, employees, suppliers and shareholders for their continued interest and support of our company. Fiscal 2019 was a recovery year. The company remains very solid and has a bright future. We thank you very much and we will speak to you again next quarter. Have a good day.
伊恩，非常感谢，感谢今天参加电话会议的所有人。 只有几句结束语，管理层对我们业务的未来仍然非常乐观。 我们对我们在市场中的地位感到满意。 我们的员工在Babies R Us的消亡和婴儿R Us的终极清算后做了非凡的重建工作。 我们要感谢所有客户，员工，供应商和股东对我们公司的持续关注和支持。 2019财年是复苏年。 公司仍然非常稳固，前途光明。 我们非常感谢你，我们将在下个季度再次与你交谈。 祝你有美好的一天。
The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
会议现已结束。 感谢您参加今天的演讲。 您现在可以断开连接。如果您对美股 或者 港股也感兴趣, 或者想要了解如何开户, 可以加我wechat: xiaobei006006, 同时也可以拉您进美股交流群哦。