Chen CHEN | Chester CHU | Johnny XU | Rosy WANG Crown Crafts Inc. Presented: October 10, 2017 Chen CHEN | Chester CHU | Johnny XU | Rosy WANG

Content Section 1 | Introduction Section 2 | Industry Overview Section 3 | Macroeconomic Overview Section 4 | Company Business Overview Section 5 | Financial Analysis Section 6 | Valuation Section 7 | Recommendation

Introduction

Introduction Crown Crafts Inc. (Nasdaq) Company at a glance and relevant stock market performance comparison Crown Crafts Inc. (Nasdaq) Year Founded 1957 Headquarter Gonzales, Louisiana Market Cap $65.87m Business Infant, toddler, and juvenile consumer products Life Cycle Stage Mature Bought 1000 shares @ $9.37 on 5-10-2016 Stock Price $6.55 as of 10-10-2017 Source for Graph: IBIS World, Yahoo Finance

Industry Overview

Children’s & Infants’ Clothing in the U.S. Industry Overview Economic Drivers Per Capita Personal Disposable Income Consumer Confidence Index Birth Rate Number of Children Under 9 Children’s & Infants’ Clothing in the U.S. Materials Cost Oil Cotton Labor Costumers Competition from Related Industries Family Clothing Stores Department Stores Used Goods Stores E-Commerce & Online Auctions Source for Graph: IBIS World, Yahoo Finance

$9.6bn -1.7% -1.4% $458.6m $1.2bn 11,833 Industry Overview Key Statistics Snapshot Revenue Annual Growth Rate 2012-2017 Annual Growth Rate 2017-2022 $9.6bn -1.7% -1.4% Profit Wages Business $458.6m $1.2bn 11,833 Industry Structure Life Cycle Stage Mature Regulation Level Medium Revenue Volatility Low Technology Change Capital Intensity Barriers to Entry Industry Assistance Industry Globalization Concentration Level Competition Level High Top 4 players account for 40% to 70% of industry revenue Source for Graph: IBIS World.

Macroeconomic Overview

Macroeconomic Overview Factors that will boost the growth of the industry Per Capita Personal Disposable Income U.S. Consumer Confidence Index Number of Children Aged 9 and Younger (Million) x U.S. Birth Rate Per 1,000 Women by Age Source for Graph: IBIS World, FRED Economic Data

Macroeconomic Overview Factors that will harm the growth of the industry Percentage of Services Conducted Online Global Price of Cotton & Oil 2013-2017: 17.5% Growth 2017-2022: 7.3% Growth Sales of Clothing and Clothing Accessories Stores CPI Comparison Source for Graph: IBIS World, FRED Economic Data

Company Business Overview

Market leader of infant and toddler bibs and disposable products Company Overview After a series of acquisition, Crown Crafts owns three subsidiaries Company Founded Purchased Hamco Purchased Bibsters 1968 2009 2017 1957 IPO on AMEX 1997 Purchased Neat Solution 2010 Purchased Carousel Designs Crown Crafts Infant Products Hamco Carousel Designs 2007 2009 Market leader of infant and toddler bibs and disposable products Dominant manufacturer of infant and toddler bedding, blankets and accessories in the industry Both manufacturer and online retailer of premium infant, toddler bedding and nursery décor CRWS 21th Annual BURKENROAD REPORTS Investment Conference Presentation https://www.babybedding.com/about-us

Crown Crafts Infant Products Major Products A glance for the major products of each subsidiaries Toddler Bedding Crib Bedding Crib Bedding Crown Crafts Infant Products Carousel Designs Blanket Design Your Own Hamco Neat Solutions Bibs Solutions Bath Solutions On-the-go Solutions http://www.nojo.com/； http://www.hamcobaby.com/； https://www.babybedding.com/

Sales by Operating Subsidiaries Sales by Product Categories Sales Breakdown Decompose the sales by subsidiaries, regions, products & consumers Sales by Operating Subsidiaries Sales by Regions The international sales is small so far and expected to increase in the future Sales by Product Categories Sales by Consumer International All Others Toys R Us has filed for bankruptcy, which would have a negative effect on the sales CRWS 21th Annual BURKENROAD REPORTS Investment Conference Presentation CRWS 2017 10-K

Licensed products represented 62% of the gross sales Line of Brands As a manufacturer, Crown Crafts has 6 owned brands & 10 licensed brands Company Owned Brands Licensed products represented 62% of the gross sales Disney licensed products contributes 43% of the sales, but the agreement would expire in Dec.2017 Licensed Brands CRWS 21th Annual BURKENROAD REPORTS Investment Conference Presentation CRWS 2017 10-K

Five Company Locations International Strategies ; Online and Offline Strategies Compton, CA Headquarters of Crown Crafts infant Products ; Warehousing and distribution for the entire company Bentonville, AR Administrative office in support of sales to Walmart Gonzales, LA Headquarters for Hamco/ Neat Solutions and Corporate Headquarters Shanghai, China Foreign Representative Office Douglasville, GA Headquarters for Carousel Designs; Online Shopping China is the target market for the company’s international business CRWS 21th Annual BURKENROAD REPORTS Investment Conference Presentation https://www.babybedding.com/contact-us

Length of Service Length of service reflects the dedication of the workforce 49% of employees have over 10 years of service 76% of employees have over 5 years of service Average length of service is 12.6 years The Crown Crafts had 119 employees up to May 5,2017. Compared with the last year, employees decreased by 11% CRWS 21th Annual BURKENROAD REPORTS Investment Conference Presentation CRWS 2017 10-K； CRWS 2016 10-K

Contract with consumer & Licensed brands Online & Customized Service Economic Moat Business Relationship, Online & Customized Service, Economic Scale Contract with consumer & Licensed brands Established business relationship with diversified retailers Used licensed brands to generate more than half sales Complied with industrial trend to develop online store Offered customized service to satisfy users’ requirement Online & Customized Service Economic Scale Produced various products with increasing demands Higher growth margin and lower costs

s O W T SWOT Analysis License expiration of Disney The sluggish industry Decreasing number of employees Low market share O License expiration of Disney Currency & cost fluctuation Competition within the industry Bankruptcy of Toys R Us Diversified consumer & licensed brands Online shopping & Customized products Employee loyalty No substitute W More licensed brands & Consumer International market expansion T

Financial Analysis

Financial Analysis Crown Crafts has experienced downturn in Sales, but gross margin is increasing Data Source: CRWS 2013-2017 10-K

Financial Analysis DuPont Analysis Revenue Breakdown Crown Crafts is changing its revenue segment composition DuPont Analysis 2013 2014 2015 2016 2017 Tax Burden (NI/EBT) 63.7% 61.7% 62.4% 63.6% 63.3% Interest Burden (EBT/EBIT) 99.1% 99.7% 99.3% 99.6% 101.1% Operating Margin (EBIT/Revenue) 10.3% 11.5% 10.7% 12.8% 13.2% Asset Turnover (Revenue/Ave. Total Asset) 1.8 1.6 1.3 Equity Multiplier (Ave. Total Asset/ Ave. Total Equity) 1.3　 ROE 15.1%　 16.8% 15.1% 17.2% 14.1% Revenue Breakdown 2013 2014 2015 2016 2017 Bedding, blankets and accessories $55,677 $58,332 $64,038 $59,020 $42,381 % of Net Sales 71.0% 71.8% 74.5% 70.0% 64.2% Bibs, bath and disposable products $22,739 $22,962 $21,940 $25,322 $23,597 29.0% 28.2% 25.5% 30.0% 35.8% Total net sales $78,416 $81,294 $85,978 $84,342 $65,978 Data Source: CRWS 2013-2017 10-K

Valuation

Valuation | Comparable Companies Analysis Industry Classification: Apparel and Accessories (Infant’s apparel) Market Cap: 4,647m EBITDA margin: 15.2% Gross margin: 43.1% P/E ratio: 19.1x EV/EBITDA: 10.4x Carter’s Inc. Industry classification: Home furnishings (Baby and Toddler furniture accessories) Textile, Apparel and Accessories Market Cap: 802m EBITDA margin: 5.7% Gross margin: 23.8% P/E ratio: 26.3x EV/EBITDA: 8.5x Dorel Industries Inc. Industry Classification: Apparel retail Market Cap: 2,045m EBITDA margin: 11.1% Gross margin: 37.8% P/E ratio: 16.6x EV/EBITDA: 9.2x Children’s place Inc. Crown Crafts, Inc Crown Crafts’ s implied share price is $9.07 Industry Classification: Accessories, Infant’s Apparel, Textiles (Linens and Bedding) Market Cap: 65.9m EBITDA margin: 14.4% P/E ratio: 13.1x Gross margin: 29.3% Industry clasification:Prepared and Preserved Foods Grain Mill Products Edible Oils Sauces And Salad Dressings Bread and Bakery Products Bread, Biscuits and Cookies Organic Foods Frozen Foods Dairy Products and Eggs Etc. EV/EBITDA Financial Metric Implied EV Equity Value Implied share price 8.5 9.3 79.3 91.2 $9.07

Valuation | Financial Projection Driving Factor Analysis Sales Driving Factor Cost Driving Factor Favorable Factor Offers innovative products to align with the changing preference of customers. Acquired online bedding retailer Carousel Designs to broaden its sales channel, and $7.7million revenue of the subsidiary will benefit the financial statement Favorable Factor Strong desire to control cost Make good use of experts of the acquired Carousel Designs. Cut distribution cost through online channel Adverse Factor Declining birth rate Continuing sluggish retail environment Parents’ moving to concept of a “naked crib” Second largest customer Toys R Us filed for bankruptcy. License agreements with Disney would expire on Dec 31,2017 Adverse Factor RMB is appreciating against us dollar Increase cost of raw material Data Source: CRWS 2013-2017 10-K

Valuation | Discounted Cash Flow Analysis $6.22 from DCF and price range from $5.74 to $6.89 with changes in key assumptions Unlevered Free Cash Flow Projection Enterprise Value ($ in thousand) WACC Beta calculated from regression Size premium WACC is 14.89% 5-year CAGR 9.89% Perpetuity Growth Rate Considering GDP growth rate and the industry situation, set the perpetuity growth rate as 2.5% Capital Structure Debt-free company Cost of equity Perpetuity Growth rate Enterprise Value $ 54,607,000 $6.89 WACC $6.22 Implied Share Price $6.22 (Current $6.55) $5.74

Recommendation

HOLD $5.74 ~ $9.07 Recommendation Decline in the whole industry sales More M&A deals in the industry leading to larger market share, employment cut-off and lower labor cost Positive outlook of the online business segment from the Company’s acquisition of an Ecommerce subsidiary $5.74 ~ $9.07 Implied share price (Current $6.55) Decline in the whole industry sales Rising cost of raw materials Volatile revenue and profit margin HOLD

Thank you! Q&A