SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
CRAFTMADE INTERNATIONAL, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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CRAFTMADE INTERNATIONAL, INC.
650 South Royal Lane, Suite 100
Coppell, Texas 75019
October 28, 2003
TO OUR STOCKHOLDERS:
You are cordially invited to attend our 2003 annual meeting of stockholders,
which will be held Wednesday, November 26, 2003, at 9:00 a.m., local time, at
our corporate office, 650 South Royal Lane, Suite 100, Coppell, Texas.
We hold our annual meetings at our corporate office in order to provide our
stockholders an opportunity to visit our facility, meet the employees and see
your company at work. We feel this is the best way for our investors to see for
themselves what we are all about.
Please read these materials so that you'll know what we plan to do at the
meeting. Also, please sign and return the accompanying proxy card. This way,
your shares will be voted as you direct even if you can't attend the meeting. If
you would like to attend, please see the instructions on "How to Attend the
Meeting."
/s/
James R. Ridings
Chairman of the Board
(CRAFTMADE LOGO)
CRAFTMADE INTERNATIONAL, INC.
650 South Royal Lane, Suite 100
Coppell, Texas 75019
NOTICE OF THE 2003 ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of Craftmade International, Inc.
(the "Company") will be held on Wednesday, November 26, 2003, at 9:00 a.m.,
local time, at the Company's office at 650 South Royal Lane, Suite 100, Coppell,
Texas, for the following purposes:
(1) To elect ten (10) directors to serve until the next annual meeting
of stockholders of the Company and until their successors have
been elected and qualified;
(2) To ratify and approve the selection of PricewaterhouseCoopers LLP
as the Company's independent accountants for 2004; and
(3) To transact any other business properly before the annual meeting.
Only stockholders of record at the close of business on October 15,
2003, can vote at the meeting.
A complete list of stockholders entitled to vote at the annual meeting
will be maintained at the Company's offices at 650 South Royal Lane, Suite 100,
Coppell, Texas 75019, for ten days prior to the annual meeting.
All stockholders are cordially invited to attend the annual meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING
ENVELOPE. IF YOU DO ATTEND THE ANNUAL MEETING IN PERSON, YOU MAY WITHDRAW YOUR
PROXY AND VOTE IN PERSON. ATTENDANCE AT THE ANNUAL MEETING IS LIMITED TO
STOCKHOLDERS, THEIR PROXIES AND INVITED GUESTS OF THE COMPANY.
By Order of the Board of Directors,
/s/ Kathleen B. Oher
Kathleen B. Oher
Secretary
Coppell, Texas
October 28, 2003
CRAFTMADE INTERNATIONAL, INC.
650 SOUTH ROYAL LANE, SUITE 100
COPPELL, TEXAS 75019
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, NOVEMBER 26, 2003
GENERAL
The Board of Directors of Craftmade International, Inc. (the "Company")
is soliciting proxies for the 2003 annual meeting of stockholders. The annual
meeting will be held on Wednesday, November 26, 2003, at 9:00 a.m., local time,
at the Company's office at 650 South Royal Lane, Suite 100, Coppell, Texas. This
proxy statement, the form of proxy and annual report to stockholders were first
mailed to stockholders on or about November 5, 2003.
WHO CAN VOTE
Record holders of common stock, par value $0.01 per share (the "Common
Stock"), of the Company at the close of business on October 15, 2003 (the
"Record Date"), may vote at the meeting. On the Record Date, 5,426,258 shares of
Common Stock were outstanding. Each stockholder has one vote for each share of
Common Stock held by that stockholder.
HOW YOU CAN VOTE
Shares represented by a proxy in the form provided to you with this
proxy statement will be voted at the annual meeting in accordance with your
directions. To be valid and counted at the annual meeting, you must sign, date
and return your proxy card to us.
IF YOU DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU WANT TO VOTE YOUR
SHARES, WE WILL VOTE THEM:
o FOR THE ELECTION OF THE TEN NOMINEES FOR DIRECTOR NAMED IN THE
PROXY CARD; AND
o FOR THE APPROVAL OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR 2004.
OTHER MATTERS TO BE ACTED UPON AT THE MEETING
We do not know of any other matters to be presented or acted upon at
the annual meeting other than those described above. Under our Bylaws, if any
other matter is presented at the meeting on which a vote may properly be taken,
the shares represented by proxies in the accompanying form will be voted in
accordance with the judgment of the person or persons voting those shares.
REQUIRED VOTES
A majority of the shares of Common Stock entitled to vote, present in
person at the annual meeting or represented by proxy at the annual meeting,
shall constitute a quorum at the annual meeting. For purposes of the quorum and
the discussion below regarding the votes necessary to take stockholder
action, stockholders of record who are present at the annual meeting in person
or represented by proxy and who abstain, including brokers holding customers'
shares of record who cause abstentions to be recorded at the annual meeting, are
considered stockholders who are present and entitled to vote, and they count
toward the quorum.
Brokers holding shares of record for customers generally are not
entitled to vote on certain matters unless they receive voting instructions from
their customers. "Uninstructed shares" means shares held by a broker who has not
received instructions from its customers on such matters, and the broker has so
notified the Company on a proxy form or has otherwise advised us that the broker
lacks voting authority. "Broker non-votes" means the votes that could have been
cast on the matter in question by brokers with respect to uninstructed shares if
the brokers had received their customers' instructions.
Election of Directors. Directors are elected by a plurality of the
votes of the shares represented in person or by proxy. Votes may be cast in
favor of or withheld with respect to each nominee. Abstentions and broker
non-votes will not be counted by us.
Ratification of Independent Accountants. The affirmative vote of the
majority of the shares present in person or represented by proxy and entitled to
vote is required to ratify PricewaterhouseCoopers LLP as the Company's
independent accountants for 2004.
REVOCATION OF PROXIES
You can revoke your proxy at any time before it is exercised in any of
three ways:
o by submitting written notice of revocation to the Secretary of the
Company;
o by submitting another proxy that is properly signed and later
dated; or
o by attending and voting in person at the meeting.
HOW TO ATTEND THE MEETING
We encourage all holders of Common Stock on the Record Date to attend
the annual meeting. This will give you an opportunity to visit the Company's
facility, talk to management and vote your shares in person. If you are
interested in attending, call our Corporate Secretary, Kathleen B. Oher, at
(800) 527-2578 for directions.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of October 15, 2003, the number of
shares of Common Stock and the percentage of outstanding shares owned of record
by (i) each incumbent director and each nominee for director of the Company;
(ii) each named executive officer of the Company; (iii) all directors and named
executive officers of the Company as a group; and (iv) each person who
beneficially owns more than five percent of the Common Stock. Except as
otherwise noted, each named individual has sole voting and investment power with
respect to such shares.
2
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------------ ----------------------- --------
James R. Ridings(1) 814,949 15.0%
Clifford Crimmings 9,550(2) *
Kathleen B. Oher 10,000(3) *
Neall W. Humphrey(4) 407,270(5) 7.5%
John DeBlois(6) 202,518 3.7%
A. Paul Knuckley 47,118(7) *
Jerry E. Kimmel 13,718(8) *
Lary C. Snodgrass 26,067(9) *
R. Don Morris(10) 902 *
L. Dale Griggs(11) 2,580 *
William E. Bucek(12) 2,202(13) *
All directors and named executive officers 1,709,272 28.3%
as a group (11 persons)
Wellington Management Company, L.L.P.(14) 429,000 7.9%
Deutsche Bank Aktiengsellschaft(15) 707,000 13.0%
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* Less than 1%
(1) The address of Mr. Ridings is 650 South Royal Lane, Suite 100, Coppell,
Texas 75019.
(2) Includes 5,000 shares that may be issued pursuant to stock options that
are exercisable within the next 60 days.
(3) Includes 10,000 shares that may be issued pursuant to stock options that
are exercisable within the next 60 days.
(4) The address of Mr. Humphrey is 5005 Hillsdale Circle, El Dorado Hills,
California 95762.
(5) Held jointly by Mr. Humphrey and his wife, Leslie D. Humphrey.
(6) The address of Mr. DeBlois is 301 Eastbrook Road #301, Dedham,
Massachusetts 02026.
(7) Includes 250 shares owned by Mr. Knuckley's spouse and 7,200 shares owned
by a trust on behalf of Mr. Knuckley's children, of which Mr. Knuckley is
co-trustee. Mr. Knuckley disclaims beneficial ownership of such shares.
Also includes 6,000 shares that may be issued pursuant to stock options
that are exercisable within the next 60 days. Does not include 103,896
shares owned by four trusts on behalf of Mr. Ridings' children, of which
Mr. Knuckley is a co-trustee. Mr. Knuckley disclaims beneficial ownership
of these shares.
(8) Includes 6,000 shares that may be issued pursuant to stock options that
are exercisable within the next 60 days.
(9) Includes 4,000 shares held in Snodgrass Children's Ltd., a family limited
partnership. Mr. Snodgrass disclaims beneficial ownership of such shares.
Also includes 6,000 shares that may be issued pursuant to stock options
that are exercisable within the next 60 days.
(10) The address of Mr. Morris is 2390 Coyote Run, Rockwall, Texas 75087.
(11) The address of Mr. Griggs is 6617 Meadows West Dr., South, Ft. Worth,
Texas 76132.
3
(12) The address of Mr. Bucek is 1315 Russek St., Schulenburg, Texas 78956.
(13) Includes 400 shares held in Jerome Joseph Bucek Family Trust, of which
Mr. Bucek is co-trustee. Mr. Bucek disclaims beneficial ownership of such
shares.
(14) The address of Wellington Management Company, LLP ("Wellington") is 75
State Street, Boston, Massachusetts 02109. Wellington has shared
dispositive power over 429,000 shares, and has shared voting power over
323,000 shares. Wellington is an investment adviser. The information
included in this table and this note is derived from a report on Schedule
13G filed by Wellington with the Securities and Exchange Commission on
February 12, 2003.
(15) The address of Deutsche Bank Aktiengsellschaft ("Deutsche Bank") is
Taunusanlag 12, 60325 Frankfurt am Main, Germany. Deutsche Bank has sole
dispositive power over 707,000 shares and has sole voting power over
328,400 shares. The information included in this table and this note is
derived from a report on Schedule 13G filed by Deutsche Bank with the
Securities and Exchange Commission on May 9, 2003.
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
Ten directors will be elected at this year's annual meeting. Each
director will serve until the next annual meeting and until he or she is
succeeded by another director who has been duly elected and qualified.
We will vote your shares as you specify on the enclosed proxy form. If
you sign, date, and return the proxy form, but don't specify how you want your
shares voted, we will vote them for the election of all the nominees listed
below. If unforeseen circumstances (such as death or disability) make it
necessary for the Board of Directors to substitute another person for any of the
nominees, we will vote your shares for that person. Proxies can't be voted for
the election of more than ten persons to the Board of Directors. Directors are
elected by plurality vote, and cumulative voting is not permitted.
All of the nominees for director are currently members of the Board of
Directors. The following sets forth a brief biography describing the principal
occupation and certain other information about each nominee for director. Each
nominee has consented to serve as a director if elected. The following
information about the nominees was provided by the nominees
NOMINEES
JAMES R. RIDINGS, age 53, has served as Chairman and Chief Executive
Officer of the Company since 1986 and President since 1989. Mr. Ridings has been
a director of the Company since its organization in 1985 and was a Vice
President from 1985 to 1986. Between 1971 and 1984, Mr. Ridings was a sales
representative with Kevco, Inc., Fort Worth, Texas, and its predecessor company,
a wholesale distributor of ceiling fans, plumbing supplies and mobile home
accessories.
CLIFFORD CRIMMINGS, age 53, has served as Vice President of Marketing
of the Company since its organization in 1985 and a director since 1987. Between
1969 and 1985, Mr. Crimmings was employed as a sales representative and then as
a sales manager with Kevco, Inc. and its predecessor company.
4
KATHLEEN B. OHER, age 43, has served as Vice President, Chief Financial
Officer, Secretary and a director of the Company since October 1999. Between
1995 and 1999, Ms. Oher was Director of Research and Senior Vice President of
Southwest Securities, an investment banking and brokerage firm. Between 1992 and
1995, Ms. Oher was Financial and Operations Principal of Barre & Company, Inc.,
a regional brokerage firm acquired by Southwest Securities, Inc. in 1995.
Between 1989 and 1991, Ms. Oher was an accountant for Ernst & Young LLP, a
public accounting firm. Ms. Oher holds a B.S. degree in Accounting from the
University of Texas at Dallas and a Masters degree in Business Administration
from the Cox School of Business at Southern Methodist University in Dallas. Ms.
Oher has been a Certified Public Accountant since 1992.
JOHN DEBLOIS, age 50, has served as a director of the Company since
October 1998, and as Executive Vice President of Trade Source International
("TSI"), a subsidiary of the Company, since July 1998. Mr. Deblois served as
Vice President of Sales of TSI California from 1987 to July 1998. In 1979, Mr.
DeBlois purchased Regal-Lite Corp., a domestic lighting manufacturing company,
which was merged into TSI California in 1987. Between 1978 and 1979, Mr. DeBlois
served as a retail representative of Mosley, Halgarten, Eastbrook and Weedon, a
regional brokerage firm. Between 1975 and 1977, Mr. DeBlois was a stockbroker
for Paine Webber Group Inc. Mr. DeBlois received a B.B.A. degree in Economics
from Tufts University in 1975.
A. PAUL KNUCKLEY, age 54, has served as a director of the Company since
October 1996. Mr. Knuckley has served since 1974 as President and Chief
Executive Officer of Knuckley Inc., d.b.a. Ditch Witch of East Texas, and as
owner and Vice-President of Witch Equipment Co., Inc. of Ft. Worth, Texas. Prior
to 1974, Mr. Knuckley was employed by John Hancock Mutual Life Insurance Company
as a life and health underwriter. Mr. Knuckley received a B.B.A. degree from
Texas Tech University in 1971 in both Personnel and Administrative Management.
JERRY E. KIMMEL, age 66, has served as a director of the Company since
October 1996. Mr. Kimmel was a founder of Kevco, Inc., serving as Kevco's
President from 1964 to 1993, its Chairman of the Board, President and Chief
Executive Officer from 1993 to 1999, and its Vice Chairman of the Board from
1999 through June 2001. Kevco Inc. filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code on February 5, 2001. Mr.
Kimmel has served as Chairman of the Board of Governors of the Manufactured
Housing Institute, a leading manufactured housing trade group. In 1992, Mr.
Kimmel was inducted into the MH/RV Hall of Fame and in 1995 was selected
Entrepreneur of the Year for manufacturing and distribution division for the
southwest region of the United States.
LARY C. SNODGRASS, age 54, has served as a director of the Company
since October 1998. Mr. Snodgrass has been employed by Pickens, Snodgrass, Koch
& Company, P.C., a public accounting firm, since 1973, serving as managing
partner and president from 1980 to 1995 and as principal since 1995. Between
1970 and 1973, Mr. Snodgrass was a senior accountant for Arthur Andersen & Co.,
an international public accounting firm. Mr. Snodgrass received a B.B.A. degree
in Accounting from Texas Tech University in 1970. Mr. Snodgrass has been a
Certified Public Accountant since 1972. Mr. Snodgrass currently serves as an
advisory director of Chase Bank of Texas-Arlington, Texas, FAS Technologies,
Inc. and Dan Dipert Travel, Inc., and as a director of Rough Creek Lodge, Inc.,
and Conel Corporation, where he also serves as Chairman of the Board.
WILLIAM E. BUCEK, age 65, has served as a director of the Company since
October 2002. Mr. Bucek is the founder of Double B Foods, Inc., a Texas
corporation, serving as President from 1971 until 1999, and currently serving as
Chairman of the Board and Chief Executive Officer. Mr. Bucek has been a Director
of Hill Bank & Trust, Weimar, Texas, since 1994. Mr. Bucek received a B.S.
degree from Rice University in 1960.
5
L. DALE GRIGGS, age 70, has served as a director of the Company since
October 2002. Mr. Griggs is a retiree from a forty-five year banking career. Mr.
Griggs served as Executive Vice President and Director of Overton Bank and Trust
of Fort Worth, Texas, from 1983 through 1998 and as Executive Vice President of
Frost Bank, Fort Worth, Texas, from 1998 through 2001. Mr. Griggs is currently
the Director of First Security State Bank, Cranfills Gap, Texas. Mr. Griggs
received a B.S. Degree in Management and Finance from Texas Christian University
in Fort Worth, Texas. Mr. Griggs is also a graduate of Southwestern Graduate
School of Banking of Southern Methodist University.
R. DON MORRIS, age 64, has served as a director of the Company since
October 2002. Mr. Morris became Senior Vice President and Chief Financial
Officer of Michaels Stores, Inc. in January 1990 and in August 1990 he became an
Executive Vice President. Mr. Morris retired from Michaels Stores in 1997. In
1998 he joined the Board of Directors of Jumbo Sports Inc. and served on its
Audit and Compensation Committees during its time of bankruptcy. Mr. Morris
currently serves on Lake Cypress Springs Water Board, which has the
responsibility for overseeing the operations of Lake Cypress Springs. Mr. Morris
graduated from Texas Tech University with an M.B.A. in 1962.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES FOR DIRECTOR NAMED ABOVE.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TSI leases certain office space from an affiliate of Neall Humphrey,
who served as President of TSI and a Director of the Company since 1998. Mr.
Humphrey resigned from the Board of Directors and as President of TSI on October
17, 2003. This lease is for $7,500 per month on a month-to-month basis. The
Company will vacate the premises effective October 31, 2003. The Company
believes that the payments required under the lease are no less favorable than
the payments that would be required under a lease with an independent third
party.
DIRECTOR COMPENSATION
Directors who are not otherwise salaried employees of the Company are
compensated by payment of $5,000 per board meeting attended in consideration for
such service. Directors do not receive any additional compensation for their
attendance at committee meetings. In addition, directors will be reimbursed for
reasonable expenses incurred in connection with their attendance at meetings.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met four times during the fiscal year ended June
30, 2003. No incumbent director attended fewer than 75% of the total number of
meetings of the Board of Directors and of the board committees of which they
were members during such period.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has two standing committees: audit and
compensation. The duties and members of these committees are as follows:
Audit Committee. The audit committee meets with management to consider
the adequacy of the internal controls of the Company and the objectivity of
financial reporting. Its primary function is to assist the Board of Directors in
fulfilling its oversight responsibilities by reviewing (i) the financial
information to be provided to the stockholders, potential stockholders, the
investment community and others; (ii) the systems of internal controls
established by the management and the Board of Directors; and (iii) the audit
process. The audit committee also meets with the independent accountants and
with
6
appropriate Company financial personnel about these matters. The functions of
the audit committee also include recommending to the board of directors the
appointment of the independent accountants (subject to ratification by the
stockholders at the annual meeting), reviewing annually the Audit Committee
Charter, approving certain other types of professional service rendered to the
Company by the independent public accountants and considering the possible
effects of such services on the independence of such public accountants. Both
the internal accounting department and the independent accountants periodically
meet alone with the audit committee and always have unrestricted access to the
audit committee. The audit committee currently consists of A. Paul Knuckley,
Lary C. Snodgrass, Jerry Kimmel, Don Morris, Bill Bucek and Dale Griggs, each of
whom is an outside director. Mr. Snodgrass is the Chairman of the audit
committee. Four meetings of the audit committee were held during the Company's
2003 fiscal year.
Compensation Committee. The compensation committee is responsible for
reviewing and recommending compensation awards for the Company's senior
executives, including the Chief Executive Officer. The compensation committee
currently consists of A. Paul Knuckley, Lary C. Snodgrass and Jerry Kimmel, each
of whom is an outside director. The Committee met one time during the Company's
year ended June 30, 2003.
The Company at present has no standing nominating committee because the
Board of Directors as a whole functions in this capacity. The Company may
consider constituting such a committee in the future if the growth and
complexity of its operations so warrants or if compliance with regulatory
procedures is necessitated.
EXECUTIVE OFFICERS
The executive officers of the Company, who are elected by the Board of
Directors of the Company and serve at its discretion, are as follows:
Name Age Position
---- --- --------
James R. Ridings 53 Chairman of the Board,
Chief Executive Officer and
President of Craftmade
Clifford Crimmings 53 Vice President of Marketing
of Craftmade
Kathleen B. Oher 43 Vice President, Chief Financial
Officer and Secretary
of Craftmade
John DeBlois 50 Executive Vice President of TSI
The business experience of these persons is included under "Proposal One:
Election of Directors -- Nominees."
7
EXECUTIVE COMPENSATION
The following table sets forth compensation awarded by the Company to
its Chief Executive Officer and its four other most highly compensated executive
officers (the "named executive officers"), based on salary and bonus earned,
whose total compensation exceeded $100,000, rendered during the fiscal years
ended June 30, 2001, 2002 and 2003.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ---------------------------------- -----------
NAME AND SECURITIES
PRINCIPAL OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY($) BONUS ($) COMPENSATION($) STOCK AWARD(S)($) OPTIONS/SARS(#) PAYOUTS($) COMPENSATION($)
----------------- ---- --------- --------- --------------- ----------------- --------------- ---------- ---------------
James Ridings 2003 $331,115 $ 0 $ 0 $ 0 0 $ 0 $ 0
Chairman of the 2002 $316,958 $ 0 $ 0 $ 0 0 $ 0 $ 0
Board, Chief 2001 $317,450 $ 0 $ 0 $ 0 0 $ 0 $ 0
Executive Officer
and President of
Craftmade
Kathleen B. Oher 2003 $191,171 $ 0 $ 0 $ 0 0 $ 0 $ 15,652 (1)
Chief Financial 2002 $183,656 $ 0 $ 0 0 $ 21,143 (2)
Officer, and 2001 $183,144 $ 0 $ 0 0 $ 5,144 (3)
Secretary
of Craftmade
Clifford Crimmings 2003 $191,053 $ 0 $ 0 $ 0 0 $ 0 $ 3,846 (3)
Vice President 2002 $182,631 $ 0 $ 0 $ 0 0 $ 0 $ 5,244 (3)
Marketing of 2001 $183,168 $ 0 $ 0 $ 0 0 $ 0 $ 5,239 (3)
Craftmade
Neall W. Humphrey(4) 2003 $286,542 $ 0 $ 0 $ 0 0 $ 0 $ 3,675 (3)
President of TSI 2002 $273,610 $ 0 $ 0 $ 0 0 $ 0 $ 4,047 (3)
2001 $263,016 $ 0 $ 0 $ 0 0 $ 0 $ 3,089 (3)
John DeBlois 2003 $286,541 $ 0 $ 0 $ 0 0 $ 0 $ 0
Executive Vice 2002 $273,010 $ 0 $ 0 $ 0 0 $ 0 $ 0
President of TSI 2001 $263,016 $ 0 $ 0 $ 0 0 $ 0 $ 0
(1) Includes $5,621 contributed by the Company on behalf of Ms. Oher pursuant
to the Company's 401(k) plan and $10,031 provided to Ms. Oher pursuant to
the Company's tuition reimbursement program.
(2) Includes $5,257 contributed by the Company on behalf of Ms. Oher pursuant
to the Company's 401(k) plan and $15,887 provided to Ms. Oher pursuant to
the Company's tuition reimbursement program.
(3) Contributed by the Company on behalf of the named executive officers to
the Company's 401(k) plan.
(4) Mr. Humphrey resigned his positions with the Company and its subsidiaries
effective October 17, 2003.
OPTION EXERCISES AND HOLDINGS
The following table summarizes the number and value of options
exercised during the fiscal year ended June 30, 2003, if any, as well as the
number and value of unexercised options, as of June 30, 2003, for each of the
named executive officers of the Company.
8
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE OPTION AT FY END OPTION AT FY END($)(1)
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ----------- ------------------------- ----------------------------------
James Ridings -- -- -- --
Kathleen B. Oher 10,000 $ 73,693 0 / 20,000 $0 / $225,200
Clifford Crimmings 5,000 $ 51,264 0 / 10,000 $0 / $113,200
Neall W. Humphrey -- -- -- --
John DeBlois -- -- -- --
----------
(1) Calculated using the aggregate market value (based on a June 30, 2003
closing price per share of $18.01) of the shares of Common Stock
underlying such options less the aggregate exercise price payable.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
TSI Employment Agreements. In connection with the acquisition of TSI,
each of Neall W. Humphrey and John DeBlois entered into employment agreements
with the Company (collectively, the "TSI Employment Agreements"), effective July
1, 1998. The terms of these employment agreements expired June 30, 2003. Mr.
Humphrey resigned his positions with the Company and its subsidiaries effective
October 17, 2003.
Pursuant to the terms of the TSI Employment Agreements, Mr. Humphrey
became President of TSI, and Mr. DeBlois became Executive Vice President of TSI.
The term of each of the TSI Employment Agreements was initially three years, and
each TSI Employment Agreement were extended for two additional one-year terms.
Mr. Humphrey's and Mr. DeBlois' salaries were to be increased proportionate to
any increases in the salary of the Chief Executive Officer of the Company,
subject to certain conditions. In addition, Mr. Humphrey and Mr. DeBlois were
entitled to receive an annual bonus based on the performance of TSI, with the
standards of such bonus to be comparable to the standards concerning receipt of
any bonus by the Chief Executive Officer of the Company. In addition, pursuant
to the TSI Employment Agreements, Mr. Humphrey and Mr. DeBlois were entitled to
certain other benefits, including an automobile and the right to participate in
any stock option plan of the Company that were provided to the Company's Chief
Executive Officer. The TSI Employment Agreements also contain certain
confidentiality and noncompetition provisions.
In the event that a TSI Employment Agreement had been terminated by the
executive for good reason or by TSI without cause (as such terms are defined in
the TSI Employment Agreements), that executive would have been entitled to
receive his salary for the remainder of the term of such TSI Employment
Agreement, along with (i) any accrued or unused vacation or sick leave for the
calendar year and (ii) that portion of his bonus for the fiscal year during
which the termination is effective, prorated through the date of termination. If
a TSI Employment Agreement had been terminated by TSI for cause (as defined in
the TSI Employment Agreements) or the executive had been terminated for any
reason other than for good reason, that executive would have been entitled to
receive his salary only through the date of termination and would not have been
entitled to any bonus for the fiscal year of the termination. If a TSI
Employment Agreement would have been terminated as a result of the disability of
the executive, that executive would have been entitled to receive his salary
through the remainder of the calendar month of termination and the period until
disability insurance benefits commence. In the event of termination of a TSI
Employment Agreement because of death of the executive, that executive will be
entitled to receive his salary through the remainder of the calendar month of
the termination, along with the executive's bonus, if any, for the fiscal year
during which his death occurs, prorated through the end of the calendar month
during which his death occurs.
9
Oher Employment Agreement. Effective October 25, 1999, Kathleen Oher
entered into an employment agreement with the Company (the "Oher Employment
Agreement"). The term of the Oher Employment Agreement is initially three years.
After the initial term, the Oher Employment Agreement will be extended for two
additional one-year terms, unless Ms. Oher elects not to renew. At October 25,
2003, the Oher Employment Agreement was extended for a one-year term. Ms. Oher's
salary is to be increased proportionate to any increases in the salary of the
Chief Executive Officer of the Company, subject to certain conditions. In
addition, Ms. Oher will be entitled to receive an annual bonus based on the
performance of the Company, with the standards of such bonus to be comparable to
the standards concerning receipt of any bonus by the Chief Executive Officer of
the Company. Pursuant to the Oher Employment Agreement, Ms. Oher is entitled to
certain other benefits, including the right to participate in any stock option
plan of the Company that is provided to the Company's Chief Executive Officer.
Ms. Oher also received a grant of options to purchase 50,000 shares of Common
Stock, with an exercise price of $6.75, with such stock options vesting over
five years. The Oher Employment Agreement also contains certain confidentiality
and noncompetition provisions.
In the event that the Oher Employment Agreement is terminated by the
executive for good reason or by the Company without cause (as such terms are
defined in the Oher Employment Agreement), Ms. Oher will be entitled to receive
her salary for the remainder of the term of the Oher Employment Agreement, along
with (i) the value of any accrued or unused vacation or sick leave for the
calendar year and (ii) that portion of her bonus for the fiscal year during
which the termination is effective, prorated through the date of termination. If
the Oher Employment Agreement is terminated by the Company for cause (as defined
in the Oher Employment Agreement) or Ms. Oher terminates for any reason other
than for good reason, Ms. Oher will be entitled to receive her salary only
through the date of termination and will not be entitled to any bonus for the
fiscal year of the termination. If the Oher Employment Agreement is terminated
as a result of the disability of Ms. Oher, she will be entitled to receive her
salary through the remainder of the calendar month of termination and the period
until disability insurance benefits commence. In the event of termination of the
Oher Employment Agreement because of death of Ms. Oher, she will be entitled to
receive her salary through the remainder of the calendar month of the
termination, along with her bonus, if any, for the fiscal year during which his
death occurs, prorated through the end of the calendar month during which her
death occurs. If the Oher Employment Agreement is terminated by either the
Company or Ms. Oher for any reason within twelve months of a Change of Control
of the Company (as defined in the Oher Employment Agreement), and (i) such
termination occurs during the initial term of the Oher Employment Agreement,
then the Company will pay Ms. Oher's salary for the remainder of such initial
term plus two times her salary, (ii) such termination occurs during the first
additional year of the Oher Employment Agreement, the Company will pay Ms.
Oher's salary for the remainder of such additional year plus an amount equal to
Ms. Oher's salary, and (iii) if such termination occurs during the second
additional year of the Oher Employment Agreement, the Company will pay Ms.
Oher's salary for the remainder of such second additional year.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee is responsible for reviewing and
recommending compensation awards for the Company's senior executives, including
the Chief Executive Officer. The compensation committee currently consists of A.
Paul Knuckley, Lary C. Snodgrass and Jerry Kimmel, each of whom is an outside
director.
Executive Compensation: Philosophy and Program Components. The
compensation committee believes that the overall objective of the executive
compensation program should be to encourage and reward enhancement of
stockholder value. The compensation committee believes that the executive
compensation program should be a comprehensive plan that will (i) motivate
executives for long-term management of the Company resulting in increased
stockholder value; (ii) reward effective management
10
for the Company through annual performance evaluations; and (iii) attract and
retain key executives through competitive salaries and other incentives. The two
primary components of executive compensation are currently base salary and cash
bonuses. Executives also participate in certain benefit programs available to
other salaried employees.
Base Salary and Bonus. In the fiscal year ended June 30, 2002, base
salaries and bonuses for executive officers were based upon the individual's
responsibilities, experience and expected performance, taking into account,
among other things, the individual's initiative, contributions to the Company's
overall performance and handling of special projects. Base salaries for
executive officers generally are reviewed periodically for possible adjustment,
but are not necessarily changed that frequently.
At various times in the past, the Company has adopted certain
broad-based employee benefit plans in which the executive officers and other key
management employees have been permitted to participate, including the
employee's 401(k) plan and the life and health insurance benefit plans available
to all salaried employees. Benefits under these plans are not typically directly
or indirectly tied to the Company's performance.
Chief Executive Officer Compensation. Mr. Ridings' base salary for the
fiscal year ended June 30, 2003, was increased by 4% from the prior fiscal year,
from $316,958 to $331,115. No bonus was paid to Mr. Ridings for the fiscal year
ended June 30, 2003. As with all executive officers, Mr. Ridings' bonus
compensation is linked to individual performance and the Company's
profitability.
Within the framework described above, the compensation committee
determines Mr. Ridings' base salary by reviewing his individual contributions to
the Company's business, level of responsibility, and career experience. The
compensation committee also reviews the salary structure of chief executive
officers of other companies in the industry. The committee does not think narrow
quantitative measures or formulas are sufficient for determining Mr. Ridings'
base salary. The committee does not give specific weights to the factors
considered, but the primary factor is Mr. Ridings' individual contributions to
the business.
Mr. Ridings currently does not have any stock options to purchase
Common Stock, and, as a result of his current ownership levels of Common Stock,
it is not anticipated that he will be awarded stock options in the future. The
Company plans to reserve the stock options for future issuance to the Company's
employees and other members of the Company's management.
Other Executive Officer Compensation. In fiscal year ended June 30,
2003, each of Mr. Humphrey, President of TSI, Mr. DeBlois, Executive Vice
President of TSI, and Ms. Oher, Vice President, Chief Financial Officer and
Secretary of the Company, were compensated pursuant to employment agreements
with the Company. See "Employment Contracts and Termination of Employment
Arrangements" above.
By the Compensation Committee:
A. Paul Knuckley
Lary C. Snodgrass
Jerry Kimmel
11
AUDIT COMMITTEE REPORT
In this section below, financial and accounting management policies and
practices of the Company are described.
Composition. The audit committee of the board of directors is composed
of six independent directors, as defined under Rule 4200(a)(15) of the National
Association of Securities Dealers' listing standards. The audit committee
presently consists of A. Paul Knuckley, Lary C. Snodgrass, Jerry Kimmel, R. Don
Morris, L. Dale Griggs and William E. Bucek. The board of directors has adopted
a written charter for the audit committee.
Responsibilities. The responsibilities of the audit committee include
recommending to the board of directors an accounting firm to be engaged as the
Company's independent accountants. Management is responsible for the Company's
internal controls and financial reporting process. The independent accountants
are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with auditing standards
generally accepted in the United States of America and for issuing a report
thereon. The audit committee's responsibility is to oversee these processes.
Review with Management and Independent Accountants. In this context,
the audit committee has met and held discussions with management and the
independent accountants. Management represented to the audit committee that the
Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, and
the audit committee has reviewed and discussed the consolidated financial
statements with management and the independent accountants. The audit committee
discussed with the independent accountants matters required to be discussed by
Statement on Auditing Standards No. 61, "Communication with Audit Committees."
The Company's independent accountants also provided to the audit
committee the written disclosures required by Independent Standards Board
Standard No. 1, "Independent Discussions with Audit Committees," and the audit
committee discussed with the independent accountants, PricewaterhouseCoopers
LLP, the firm's independence.
Summary. Based upon the audit committee's discussions with management
and the independent accountants and the audit committee's review of the
representations of management, and the report of the independent accountants to
the audit committee, the audit committee recommended that the board of directors
include the audited consolidated financial statements in the Company's Annual
Report on Form 10-K for the year ended June 30, 2003 as filed with the
Securities and Exchange Commission.
By the Audit Committee:
William E. Bucek
L. Dale Griggs
Jerry Kimmel
A. Paul Knuckley
R. Don Morris
Lary C. Snodgrass
STOCK PERFORMANCE GRAPH
The following graph provides an indicator of and compares the
percentage change of cumulative total shareholder return of the Company's common
stock against the cumulative total return of the Russell 2000 Index and the
Nasdaq Composite Index. This graph assumes $100 was invested on June 30, 1998
12
in the Company's common stock, the Russell 2000 Index and the Nasdaq Composite
Index. Both the Russell 2000 Index and the Nasdaq Composite Index exclude the
Company. This graph also assumes that the Company's quarterly dividend was
reinvested in the Company's common stock.
(PERFORMANCE GRAPH)
6/30/1998 6/30/1999 6/30/2000 6/30/2001 6/30/2002 6/30/2003
--------- --------- --------- --------- --------- ---------
CRAFTMADE 100.00 112.81 60.11 100.39 137.06 163.54
RUSSELL 2000 100.00 100.06 113.08 112.09 101.15 98.03
NASDAQ COMPOSITE 100.00 141.77 209.32 112.09 77.22 85.65
The historical stock price performance of the Company's common stock
shown on the graph above is not necessarily an indication of future stock
performance.
The Company has compared its stock price performance with that of the
Russell 2000 Index as it does not believe it can reasonably identify a peer
group and no comparable published industry or line-of-business index is
available. The Russell 2000 Index consists of companies with market
capitalization similar to that of the Company; accordingly, the Company believes
the Russell 2000 Index is the best available performance comparison.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and beneficial owners of
more than 10% of the outstanding shares of Common Stock to file with the SEC
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. A Form 4 was not filed timely for
Jerry Kimmel, A. Paul Knuckley and Lary C. Snodgrass, non-employee directors of
the Company, reporting the purchase of common stock pursuant to the Company's
Non-Employee Directors' Stock Plan in February 2003. A Form 4 was not filed
timely for R. Don Morris, William E. Bucek, Lary C. Snodgrass, A. Paul Knuckley,
and Jerry E. Kimmel for stock purchased in August 2003. Otherwise, to the
Company's knowledge, based solely upon its review of the copies of such forms
received by it and written representations from reporting persons, the Company
believes that all such reports were submitted on a timely basis during the
fiscal year ended June 30, 2003.
13
PROPOSAL TWO
RATIFICATION OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP ("PWC") has been our independent public
accountants for many years. The Audit Committee and the Board believe that PWC's
long-term knowledge of the Company is invaluable. Partners and employees of the
firm engaged in audits are periodically changed, providing the Company with new
expertise and experience. Representatives of PWC have direct access to members
of the Audit Committee and regularly attend their meetings. Representatives of
PWC will attend the annual meeting to answer appropriate questions and make a
statement if they desire.
AUDIT AND RELATED FEES
Audit Fees. The Audit fees of $112,500 for the year ended June 30, 2003
were for professional services rendered for the audits of the consolidated
financial statements of the Company and the review of the consolidated financial
information included in the Company's Forms 10-Q for the year ended June 30,
2003. The audit fees of $171,900 for the year ended June 30, 2002 were for
professional services rendered for the audits of the consolidated financial
statements of the Company and the restated financial statements for 2001 and
2000, as well as the review of the consolidated financial information included
in the Company's Forms 10-Q and 10-Q/A for the years ended June 30, 2002.
Audit Related Fees. The Audit Related fees paid to PWC were $25,241 and
$6,000 for the years ended June 30, 2002 and 2003, respectively, were for
assurance and related services related to consultations concerning responses to
a comment letter from the Securities and Exchange Commission.
Tax Fees. The tax fees paid to PWC were $35,875 and $32,390 for the
years ended June 30, 2002 and 2003, respectively, were for services related to
tax compliance, including the preparation of tax returns and tax planning and
tax advice.
There were no other fees for the years ended June 30, 2002 and 2003.
The audit committee has determined that the non-audit services described above
are compatible with maintaining PWC's independence.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS FOR 2003.
STOCKHOLDER PROPOSALS AND OTHER MATTERS
Any stockholder who intends to present a proposal at the 2004 annual
meeting of stockholders, and who wishes to have a proposal included in the
Company's proxy statement for that meeting, must deliver the proposal to the
Secretary of the Company at the Company's executive offices in Coppell, Texas,
for receipt not later than July 2, 2004. A stockholder proposal submitted
outside of the processes established in Regulation 14a-8 promulgated by the
Securities and Exchange Commission will be considered untimely September 15,
2004.
The cost of soliciting proxies will be borne by the Company. In
addition to solicitation by mail, certain employees of the Company, who will
receive no special compensation therefor, may solicit proxies in person or by
telephone or telegraph. No additional written materials besides the proxy
statement have been authorized or will be employed in connection with the
solicitation of proxies.
The annual report to stockholders for the fiscal year ended June 30,
2003 is enclosed with this proxy statement. The annual report does not form any
part of material for the solicitation of proxies.
By Order of the Board of Directors,
/s/ Kathleen B. Oher
Kathleen B. Oher
Secretary
14
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PROXY - CRAFTMADE INTERNATIONAL, INC.
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THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- NOVEMBER 26, 2003
The undersigned, revoking all previous proxies, hereby appoints(s) James
Ridings, Kathleen Oher, and Clifford Crimmings, or any of them, Proxies, with
full power of substitution to represent and to vote all shares of Common Stock,
$0.01 par value, of Craftmade International, Inc. owned by the undersigned at
the Annual Meeting of Stockholders to be held at the Company's corporate office,
650 South Royal Lane, Suite 100, Coppell, Texas 75019 on Wednesday, November 26,
2003, including any original or subsequent adjournment thereof, with respect to
the proposals set forth in the Notice of Annual Meeting and Proxy Statement. No
business other than matters described below is expected to come before the
meeting, but should any other matter requiring a vote of stockholders arise, the
persons named herein will vote thereof in accordance with their best judgement.
All powers may be exercised by all of said Proxies or substitutes voting or
acting or, if only one votes or acts, then by that one. Receipt of the Notice of
Annual Meeting and Proxy Statement is hereby acknowledged.
The shares represented by this proxy will be voted as directed. Unless revoked,
this proxy shall terminate on November 27, 2003, the day after the stockholders
meeting, or if the meeting is continued or adjourned, the day after the
continuation or adjournment. IF NO SPECIFIC DIRECTION IS GIVEN THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE NOMINEES NAMED IN PROPOSAL 1,
FOR PROPOSAL 2 AND, IN THE DISCRETION OF THE PROXIES, UPON ANY OTHER BUSINESS.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
IMPORTANT: TO BE SIGNED AND DATED ON REVERSE SIDE
000000 0000000000 0 0000
CRAFTMADE INTERNATIONAL, INC.
000000000.000 ext
000000000.000 ext
000000000.000 ext
MR A SAMPLE 000000000.000 ext
DESIGNATION (IF ANY) 000000000.000 ext
ADD 1 000000000.000 ext
ADD 2 000000000.000 ext
ADD 3
ADD 4 HOLDER ACCOUNT NUMBER
ADD 5
ADD 6 C 1234567890 J N T
(BAR CODE)
[ ] Mark this box with
an X if you have made
changes to your name or
address details above.
--------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
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A ELECTION OF DIRECTORS
1. The Board of Directors recommends a vote FOR the listed nominees.
For Withhold For Withhold For Withhold
01 - James Ridings [ ] [ ] 05 - Jerry E. Kimmel [ ] [ ] 09 - William E. Bucek [ ] [ ]
02 - Clifford Crimmings [ ] [ ] 06 - John DeBlois [ ] [ ] 10 - L. Dale Griggs [ ] [ ]
03 - Kathleen Oher [ ] [ ] 07 - Lary C. Snodgrass [ ] [ ]
04 - A. Paul Knuckley [ ] [ ] 08 - R. Don Morris [ ] [ ]
B ISSUE
The Board of Directors recommends a vote FOR the following proposal.
For Against Abstain
2. Ratify the Appointment of [ ] [ ] [ ]
PricewaterhouseCoopers LLP
as independent Auditors.
In their discretion, the Proxies are authorized
to vote upon such other business or matters as
may come before the meeting or any adjournment
thereof.
C AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
Where there is more than one owner, each should sign. When signing as attorney,
administrator, executor, guardian, or trustee, please add your full title as
such. If executed by a corporation or partnership, the proxy should be signed in
the corporate or partnership name by a duly authorized officer or other duly
authorized person indicated such officer's or other person's title.
Signature 1 - Please keep signature within the box
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Signature 2 - Please keep signature within the box
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Date (mm/dd/yyyy)
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/ /
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1 UPX HHH PPPP 002602