SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ----- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ----- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO --------- Commission File Number ---------------------- 000-26667 CRAFTMADE INTERNATIONAL, INC. ----------------------------- (Exact name of registrant as specified in its charter) Delaware 75-2057054 -------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 650 South Royal Lane, Suite 100, Coppell, Texas 75019 ----------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (972) 393-3800 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x. No . ---------- ---------- 5,447,258 shares of Common Stock were outstanding as of November 11, 2003. Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X ------- ------- 1 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES Index to Quarterly Report on Form 10-Q Part I. Financial Information Item 1. Financial Statements (unaudited) Condensed Consolidated Statements of Income for the three months ended September 30, 2003 and 2002. Condensed Consolidated Balance Sheets as of September 30, 2003 and June 30, 2003. Condensed Consolidated Statement of Changes in Stockholders' Equity for the three months ended September 30, 2003. Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2003 and 2002. Notes to Condensed Consolidated Financial Statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Item 4. Controls and Procedures. Part II. Other Information Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K 2 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) FOR THE THREE MONTHS ENDED ---------------------------- September 30, September 30, 2003 2002 ------------- ------------- (In thousands except per share data) Net Sales $ 18,571 $ 19,022 Cost of goods sold 12,277 12,941 ------------ ------------ Gross profit 6,294 6,081 ------------ ------------ Selling, general and administrative expenses 3,882 3,824 Interest expense, net 182 195 Depreciation and amortization 152 151 ------------ ------------ Total expenses 4,216 4,170 ------------ ------------ Income before equity in earnings of 50% owned investees and 2,078 1,911 income taxes Equity in earnings of investees before income taxes 1,645 1,554 ------------ ------------ Income before income taxes 3,723 3,465 Provision for income taxes 1,353 1,261 ------------ ------------ Net income $ 2,370 $ 2,204 ============ ============ Basic earnings per common share $ 0.44 $ 0.38 ============ ============ Diluted earnings per common share $ 0.43 $ 0.38 ============ ============ Cash dividends declared per common share $ 0.10 $ 0.07 ============ ============ SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS September 30, June 30, 2003 2003 ------------- ------------ (Unaudited) (In thousands) Current assets: Cash $ 1,762 $ 3,469 Accounts receivable -- net of allowance for doubtful accounts of 10,875 11,706 $150 and $150 respectively Receivables from 50% owned investees 1,396 217 Inventory 14,205 9,394 Deferred income taxes 358 358 Prepaid expenses and other current assets 870 540 ------------ ------------ Total current assets 29,466 25,684 ------------ ------------ Property and equipment, net Land 1,535 1,535 Building 7,784 7,784 Office furniture and equipment 3,905 3,873 Leasehold improvements 259 259 ------------ ------------ 13,483 13,451 Less: accumulated depreciation (4,261) (4,109) ------------ ------------ Total property and equipment, net 9,222 9,342 ------------ ------------ Goodwill, net of accumulated amortization of $1,204 and $1,204 respectively 4,735 4,735 Investment in 50% owned investees 3,233 3,567 Other assets 12 12 ------------ ------------ Total other assets 7,980 8,314 ------------ ------------ Total assets $ 46,668 $ 43,340 ============ ============ SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY September 30, June 30, 2003 2003 ------------- ------------ (Unaudited) (In thousands) Current liabilities: Note payable -- current $ 826 $ 809 Revolving lines of credit 7,500 12,000 Accounts payable 7,079 2,517 Commissions payable 239 247 Income taxes payable 1,619 484 Accrued customer allowances 1,184 1,012 Other accrued expenses 1,205 914 ------------ ------------ Total current liabilities 19,652 17,983 Other non-current liabilities: Note payable -- long term 4,109 4,322 Deferred income taxes 497 497 ------------ ------------ Total liabilities 24,258 22,802 ------------ ------------ Commitments and contingencies (Note 12) Stockholders' equity: Series A cumulative, convertible callable preferred stock, $1.00 par value, 2,000,000 shares authorized; 32,000 shares issued 32 32 Common stock, $.01 par value, 15,000,000 shares authorized, 9,432,035 and 9,425,535 shares issued, respectively 94 94 Additional paid-in capital 13,628 13,584 Unearned deferred compensation (33) (43) Retained earnings 37,502 35,684 ------------ ------------ 51,223 49,351 Less: treasury stock, 4,004,474 common shares at cost, and 32,000 preferred shares at cost (28,813) (28,813) ------------ ------------ Total stockholders' equity 22,410 20,538 ------------ ------------ Total liabilities and stockholders' equity $ 46,668 $ 43,340 ============ ============ SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 (In thousands) SERIES A ADDITIONAL UNEARNED PREFERRED PAID-IN DEFERRED VOTING COMMON STOCK STOCK CAPITAL COMPENSATION ------------------- --------- ---------- ----------- Shares Amount -------- -------- --------- ---------- ----------- Balance as of June 30, 2003 9,426 94 32 13,584 (43) Comprehensive income: Net income for the three months ended September 30, 2003 -- -- -- -- -- -------- -------- --------- ---------- ----------- Total comprehensive income Deferred compensation earned -- -- -- -- 10 Exercise of employee stock options 6 -- -- 44 -- Cash dividends -- -- -- -- -- -------- -------- --------- ---------- ----------- Balance as of September 30, 2003 9,432 $ 94 $ 32 $ 13,628 $ (33) ======== ======== ========= ========== =========== (In thousands) ACCUMULATED OTHER RETAINED COMPREHENSIVE EARNINGS INCOME TREASURY STOCK -------- ------------- ------------------- Shares Amount Total -------- ------------- -------- -------- -------- Balance as of June 30, 2003 35,684 -- 4,036 (28,813) 20,538 Comprehensive income: Net income for the three months ended September 30, 2003 2,370 -- -- -- 2,370 -------- ------------- -------- -------- -------- Total comprehensive income 2,370 2,370 Deferred compensation earned -- -- -- -- 10 Exercise of employee stock options -- -- -- -- 44 Cash dividends (552) -- -- -- (552) -------- ------------- -------- -------- -------- Balance as of September 30, 2003 $ 37,502 $ -- 4,036 $(28,813) $ 22,410 ======== ============= ======== ======== ======== SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6 CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) FOR THE THREE MONTHS ENDED ------------------------------ September 30, September 31, 2003 2002 ------------- ------------- (In thousands) Net cash provided by operating activities: $ 3,529 $ 9,533 ------------ ------------ Cash flows from investing activities: Net additions to equipment (32) (49) ------------ ------------ Net cash used in investing activities (32) (49) ------------ ------------ Cash flows from financing activities: Net payment on lines of credit (4,500) (2,884) Principal payments on note payable (196) (169) Treasury stock repurchases -- (4,779) Stock options exercised 44 -- Cash dividends (552) (418) ------------ ------------ Net cash used in financing activities (5,204) (8,250) ------------ ------------ Net increase in cash (1,707) 1,234 Cash at beginning of period 3,469 624 ------------ ------------ Cash at end of period $ 1,762 $ 1,858 ============ ============ SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES SEPTEMBER 30, 2003 (Unaudited) Note 1 -- BASIS OF PREPARATION AND PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and include all adjustments which are, in the opinion of management, necessary for a fair presentation. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries; 50% owned subsidiaries are accounted for using the equity method. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures are adequate to make the information presented not misleading; however, it is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto which are incorporated by reference in the Company's Annual Report on Form 10-K, as amended, for the fiscal year ended June 30, 2003. The financial data for the interim periods may not necessarily be indicative of results to be expected for the year. Employee stock-based compensation The Company has adopted SFAS 123, "Accounting for Stock-Based Compensation," on a disclosure basis only. The Company measures compensation costs under Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and its related interpretations. Had compensation cost for all of the Company's stock option plans been determined based upon fair value at the grant dates consistent with the methodology prescribed in FAS 123, the Company's net income and net income per share would have changed to the pro forma amounts listed below using the weighted average fair values indicated. 8 FOR THE THREE MONTHS ENDED ---------------------------- September 30, September 30, 2003 2002 ------------- ------------- Net income, as reported $ 2,370 $ 2,204 Net income, proforma 2,339 2,173 Basic earnings per share, as reported 0.44 0.38 Basic earnings per share, pro forma 0.44 0.38 Diluted earnings per share, as reported 0.43 0.38 Diluted earnings per share, pro forma 0.43 0.37 9 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES September 30, 2003 (Unaudited) (In Thousands) Note 2 -- EARNINGS PER SHARE The following is a reconciliation of the numerator and denominator used in the basic and diluted EPS calculations: FOR THE THREE MONTHS ENDED September 30, September 30, 2003 2002 ------------- ------------- (In thousands except per share data) Basic and Diluted EPS Numerator: Net Income $ 2,370 $ 2,204 ------------ ------------ Denominator: Common Shares Outstanding 5,422 5,796 ------------ ------------ Basic EPS $ 0.44 $ 0.38 ============ ============ Denominator: Common Shares Outstanding 5,422 5,796 Options 59 62 ------------ ------------ Total Shares 5,481 5,858 ============ ============ Diluted EPS $ 0.43 $ 0.38 ============ ============ 10 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES June 30, 2003 (In Thousands) Note 3 -- INVESTMENT IN 50% OWNED INVESTEES Combined summarized financial information for Design Trends and PHI is as follows for the three months ended September 30, 2003 and 2002: September 30, September 30, 2003 2002 ------------- ------------- Net Sales $ 12,620 $ 11,155 Gross profit 3,927 3,991 Income before income taxes 3,292 3,097 Accounts receivable -- net 3,674 4,532 Inventories 3,223 3,428 Total current assets 9,773 8,754 Total assets 10,994 11,540 Revolving line of credit -- 255 Note payable -- current 167 167 Total current liabilities 4,375 6,596 Total liabilities 4,528 6,915 Total partners' capital 6,466 4,625 The Company received distributions of $1,980,000 and $308,000 for the three months ended September 30, 2003 and 2002 respectively, from these two 50% owned investees. The Company's 50% owned investees operate in the form of partnerships and, consequently, do not file federal income tax returns. Instead, the Company's share of their income is reported in the Company's federal tax return. 11 Note 4 -- TRANSACTIONS WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES There are no sales between the Company and its 50% investees or between the investees. The investees utilize the Company's Coppell, Texas distribution facility and Company personnel in the conduct of their operations. The Company charges Design Trends for facility rent and payroll costs for those full time Company employees when they work directly in Design Trends operations. Facility rent is based on total square footage occupied by Design Trends and payroll costs represent actual costs for those employees. No allocation of indirect personnel costs, including management level personnel, is included in the charge to Design Trends. From time to time, the Company utilizes borrowings under its line of credit to provide Design Trends with advances for its working capital needs. The Company charges Design Trends interest on these advances at the bank's prime rate plus two percentage points and interest is calculated on the average outstanding monthly balance. With respect to the Company's 50% owned, unconsolidated subsidiaries, PHI had $3,000,000 available on it's line of credit, on which there was no outstanding balance at September 30, 2003. Craftmade is a guarantor of this line of credit. Craftmade agreed to guarantee the line of credit, for business purposes, in order to induce the lender to provide the line of credit to PHI. PHI's line of credit expires October 1, 2004. PHI reimburses the Company $30,000 per month for general warehouse and administrative expenses. Craftmade's charges to its 50% owned investees are summarized as follows: Three Months Ending --------------------------- September 30 September 30 2003 2002 ------------ ------------ Rent -- Design Trends $ 66,000 $ 60,000 Payroll -- Design Trends $ 249,000 $ 243,000 Interest -- Design Trends -- $ 20,000 Administrative -- PHI $ 90,000 $ 90,000 12 NOTE 5 -- SEGMENT INFORMATION The Company operates in two reportable segments, Craftmade and TSI. The accounting policies of the segments are the same as those described in Note 2 -- Summary of Significant Accounting Policies to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2003. The Company evaluates the performance of its segments and allocates resources to them based on their operating profit and loss and cash flows. The Company is organized on a combination of product type and customer base. The Craftmade segment primarily derives its revenue from home furnishings including ceiling fans, light kits, bathstrip lighting, outdoor lighting, and lamps offered primarily through lighting showrooms, certain major retail chains and catalog houses. The TSI segment derives its revenue from outdoor lighting, and portable lamps, indoor lighting and fan accessories marketed solely to mass merchandisers. The following table presents information about the reportable segments (in thousands): Craftmade TSI Total ---------- ---------- ---------- For the three months ended September 30, 2003 ------------------ Net sales from external customers $ 14,312 $ 4,259 $ 18,571 Operating profit 2,740 (479) 2,261 For the three months ended September 30, 2002 ------------------ Net sales from external customers $ 13,461 $ 5,561 $ 19,022 Operating profit 2,329 (223) 2,106 13 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Cautionary Statement With the exception of historical information, the matters discussed in this document contain forward-looking statements. There are certain important factors that could cause results to differ materially from those anticipated by these forward-looking statements. Some of the important factors that could cause actual results to differ materially from those in the forward-looking statements include, among other things, the dependence of Trade Source International, Inc. ("TSI"), Design Trends, LLC ("Design Trends") and Prime Home Impressions, LLC ("PHI") on sales to select mass merchandiser customers and changes in those relationships, changes in anticipated levels of sales, whether due to future national or regional economic and competitive conditions, changes in relationships with Craftmade customers, customer acceptance of existing and new products, pricing pressures due to excess capacity, cost increases, changes in tax or interest rates, unfavorable economic and political developments in Asia (the location of the Company's primary vendors) and changes in the foreign currency exchange rate between the U.S. and Taiwan dollar, declining conditions in the home construction industry, inability to realize deferred tax assets, and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the Company. Results of Operations Three Months Ended September 30, 2003 Compared to Three Months Ended September 30, 2002. Net Sales. Net sales for the Company decreased $451,000 or 2.4%, to $18,571,000 for the three-month period ended September 30, 2003 from $19,022,000 for the same three-month period last year. Net sales from the Craftmade division increased $851,000, or 6.3%, to $14,312,000 for the three months ended September 30, 2003 from $13,461,000 for the same three-month period last year. The increase in sales of the Craftmade division was attributable to the success of new product introductions and increased sales of outdoor lighting. Net sales of the TSI division decreased $1,302,000, or 23.4%, to $4,259,000 for the three months ended September 30, 2003 from $5,561,000 for the same three-month period last year. The decrease was attributable to a decline in sales of outdoor lighting to a mass retail customer whose buying patterns have become somewhat sporadic in recent months. Craftmade's management anticipates that through cooperative efforts with the customer, sales to this customer in future quarters can become more consistent and comparable to prior year periods. 14 Gross Profit. Gross profit of the Company as a percentage of sales increased to 33.9% of net sales for the three months ended September 30, 2003, compared to 32.0% for the same period of 2002. The gross margin of the Craftmade division increased to 40.8% of sales from 40.4% of sales in the year-ago period. The improvement in the gross margin of the Craftmade division was due primarily to an increase in sales of higher margin products. The gross margin of the TSI division decreased to 10.8% of sales for the three months ended September 30, 2003 compared to 11.6% of sales in the year-ago period. The decline in the gross margin of TSI was due to an increase in markdown money provided to mass retail customers to help clear slow moving inventory. The impact on the gross margin was partially offset by an inventory write down of $380,000 that occurred in the three months ended September 30, 2002, that did not occur in the same three month period in the current year. Selling, General and Administrative Expenses. Total selling, general and administrative ("SG&A") expenses of the Company increased $58,000 to $3,882,000, or 20.9% of net sales, for the three months ended September 30, 2003, from $3,824,000, or 20.1% of net sales, for the same three month period last year. Total SG&A expenses of the Craftmade division were relatively flat at $2,959,000, or 20.7% of net sales, compared to $2,974,000, or 22.1% of net sales, for the same period in the previous year. The decline in SG&A expenses of the Craftmade division as a percentage of sales was primarily related to the effect of increased sales leveraging down fixed administrative costs. Total SG&A expenses of the TSI division increased $73,000 to $923,000, or 21.7% of net sales, compared to $850,000, or 15.3% of net sales, for the same period in the previous year. The increase in TSI's SG&A expenses as a percentage of sales was related to the decline in sales of the TSI division and the de-leveraging effect on fixed SG&A costs. The increase in total dollars was principally related to increased payroll costs attributable to severance pay of approximately $100,000 that was provided to terminated employees in connection with the closing of the TSI division's California office. The Company reached a severance agreement with two additional employees in the second quarter; thus, TSI will incur an additional charge of approximately $100,000 for severance pay in the second quarter of fiscal 2004. Management presently expects that the consolidation of the TSI division to the Company's Coppell headquarters will result in lower overhead for the TSI division in the second half of Fiscal 2004 and beyond. 15 Interest Expense. Net interest expense of the Company decreased $13,000 to $182,000 for the three months ended September 30, 2003 from $195,000 for the same three-month period last year. This improvement was primarily the result of a decrease in the outstanding balance of the Company's revolving line of credit, combined with lower interest rates in effect during the period. Equity in Earnings of 50% Owned Investees. Income from investees, representing the Company's 50% ownership of PHI and Design Trends, increased $91,000 to $1,645,000 from $1,554,000 for the three months ended September 30, 2003 and 2002, respectively. The increase in income from investees was principally due to an increase in sales of Design Trends' portable lamp program, partially offset by a decline in Design Trends' gross margin. Design Trends' sales increased $1,396,000 compared to the prior year period. The increase in sales was related to an increase in the number of stores carrying the portable lamp program, as well as an increase in sales in existing stores. The decline in Design Trends' gross margin was related to an increase in markdown money and vendor program allowances provided to mass retail customers. Provision For Income Taxes. The provision for income taxes increased to $1,353,000 or 36.3% of net income before taxes for the three months ended September 30, 2003, from $1,260,000 or 36.4% for the same period of the prior year. LIQUIDITY AND CAPITAL RESOURCES The Company's cash decreased $1,707,000 from $3,469,000 at June 30, 2003 to $1,762,000 at September 30, 2003. The Company's operating activities provided cash of $3,528,000, which was primarily attributable to (i) the Company's net income from operations of $2,261,000 (ii) collections of customer receivables of $804,000 and (iii) an increase in accounts payable and other current liabilities of $5,017,000. These amounts were partially offset by an increase in inventory of $4,811,000. The $32,000 of cash used in investing activities related to additions to property and equipment consisting primarily of computer equipment. Cash used for financing activities of $5,204,000 was primarily the result of (i) principal payments of $196,000 on the Company's facility note payable, (ii) principal payments of $4,500,000 on the Company's line of credit, and (iii) cash dividends of $552,000. At September 30, 2003, subject to continued compliance with certain covenants and restrictions, the Company had $20,000,000 16 available on its lines of credit, of which $7,500,000 had been utilized. The Company's management believes that its current line of credit, combined with cash flows from operations, is adequate to fund the Company's current operating needs, debt service payments and any future dividend payments, as well as fund its projected growth over the next twelve months. At September 30, 2003, $4,935,000 remained outstanding under the note payable for the Company's 378,000 square foot operating facility. The Company's management believes that this facility will be sufficient for its purposes for the foreseeable future. The facility note payable matures on January 1, 2008. On October 27, 2003, the Company and The Frost National Bank entered into an amendment (the "Amendment") to the Company's $20,000,000 line of credit. As of such date, $7,700,000 was outstanding under the line of credit. The interest rate under the line, prime less .5%, was not changed by the Amendment and the maturity date was extended to October 31, 2005. With respect to the Company's 50%-owned investees, PHI had $3,000,000 available on its line of credit, on which there was no outstanding balance at September 30, 2003. Craftmade is a guarantor of this line of credit. Craftmade agreed to guarantee the line of credit, for business purposes,in order to induce the lender to provide the line of credit to PHI. PHI's line of credit expires October 1, 2004. Fanthing, Craftmade's ceiling fan manufacturer has provided Craftmade with a $1,000,000 credit facility, pursuant to which it will manufacture and ship ceiling fans prior to receipt of payment from Craftmade. Accordingly, payment can be deferred until delivery of such products. At present levels, such credit facility is equivalent to approximately three weeks' supply of ceiling fans and represents a supplier commitment, which, in the opinion of the Company's management, is unusual for the industry and favorable to the Company. This manufacturer is not required to provide this credit facility under its agreement with Craftmade, and it may discontinue this arrangement at any time. The Company's management has reached an agreement with one of PHI's mass retail customers whereby PHI will provide a one-time allowance of $2.1 million to the customer in connection with the roll out of a new lamp accessories business. The $2.1 million charge will be incurred in the second quarter of fiscal 2004 and will equate to approximately $0.12 per share net of taxes. To satisfy anticipated demand for the portable lamp program, Design Trends maintained an inventory level of $2,442,000 at September 30, 2003. This program is highly concentrated with one mass merchandiser customer. Should the terms of the program with this particular mass merchandiser be at a level less than originally anticipated, the Company would be required to find other customers for this inventory. There can be no assurances that the Company would be able to obtain additional customers for this inventory or that any alternative sources would generate similar sales levels and profit margins as anticipated with the current mass merchandiser customer. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information set forth below constitutes a "forward looking statement." See Management's Discussion and Analysis of Financial Condition and Results of Operations -- Cautionary Statement. 17 At September 30, 2003, the Company has a $20,000,000 line of credit with The Frost National Bank at an interest rate of prime (4.00% at September 30, 2003) less .5%, of which $7,500,000 was outstanding. The line of credit is due on demand; however, if no demand is made, it is scheduled to mature October 31, 2005. At September 30, 2003, PHI had a $3,000,000 line of credit with Wachovia Bank, N.A.("Wachovia") at an interest rate equal to the one-month LIBOR plus 2%. At September 30, 2003, the one-month LIBOR rate was equal to 1.12%. There was a zero outstanding balance on the line of credit at September 30, 2003. PHI's Line of Credit is due on demand; however, if no demand is made, it is scheduled to mature October 1, 2004. In addition, PHI has a $500,000 three-year note payable to Wachovia maturing on July 29, 2005, of which $319,000 was outstanding at September 30, 2003. The note bears interest at a rate equal to the Monthly LIBOR Index plus 2.5%. Craftmade is the guarantor on PHI's lines of Credit. Because of the short-term nature of each of the Craftmade Line of Credit and the PHI Lines of Credit, the Company is subject to market-risk-associated, adverse changes in interest rates. A sharp rise in interest rates could materially adversely affect the financial condition and results of operations of the Company. The Company has not entered into any instruments to minimize this market risk of adverse changes in interest rates because the Company believes the cost associated with such instruments would outweigh the benefits that would be obtained from utilizing such instruments. Under the Craftmade Line of Credit, for each one-percentage point (1%) incremental increase in the prime rate, the Company's annualized interest expense would increase by approximately $7,500. Consequently, an increase in the prime rate of five percentage points (5%) would result in an estimated annualized increase of interest expense for the Company of approximately $37,500. Under the PHI Lines of Credit, for each one-percentage point (1%) incremental increase in LIBOR, the Company's annualized interest expense would increase by approximately $3,000. Consequently, an increase in LIBOR of five percentage points (5%) would result in an estimated annualized increase in interest expense for the Company of approximately $15,000. 18 The Company currently purchases a substantial amount of ceiling fans and other products of its Craftmade division from Fanthing, a Taiwanese company. The Company's verbal understanding with Fanthing provides that all transactions are to be denominated in U.S. dollars; however, the understanding further provides that, in the event that the value of the U.S. dollar appreciates or depreciates against the Taiwanese dollar by one Taiwanese dollar or more, Fanthing's prices will be accordingly adjusted by 2.5%. As of November 10, 2003, one U.S. dollar equaled $33.95 Taiwanese dollars. A sharp appreciation of the Taiwanese dollar relative to the U.S. dollar could materially adversely affect the financial condition and results of operations of the Company. The Company has not entered into any instruments to minimize this market risk of adverse changes in currency rates because the Company believes the cost associated with such instruments would outweigh the benefits that would be obtained from utilizing such instruments. All other purchases of the Company from foreign vendors are denominated in U.S. dollars and are not subject to adjustment provisions with respect to foreign currency fluctuations. As a result, the Company does not believe that it is subject to any material foreign currency exchange risk with respect to such purchases. During the fiscal quarter ended September 30, 2003, the Company purchased approximately $4,176,000 of products from Fanthing. Under the Company's understanding with Fanthing, each $1 incremental appreciation of the Taiwanese dollar would result in an estimated annualized net increase in cost of goods sold of approximately $418,000, based on the Company's purchases during the fiscal quarter ended September 30, 2003(on an annualized basis). A $5 incremental appreciation of the Taiwanese dollar would result in an estimated annualized increase in cost of goods sold of approximately $2,088,000, based on the Company's purchases during the fiscal quarter ended September 30, 2003(on an annualized basis). A $10 incremental appreciation of the Taiwanese dollar would result in an increase of approximately $4,176,000 on an annualized basis, based on the Company's purchases during the fiscal quarter ended September 30, 2003(on an annualized basis). These amounts are estimates of the financial impact of an appreciation of the Taiwanese dollar relative to the U.S. dollar and are based on annualizations of the Company's purchases from Fanthing for the fiscal quarter ended September 30, 2003. Consequently, these amounts are not necessarily indicative of the effect of such changes with respect to an entire year. 19 ITEM 4 CONTROLS AND PROCEDURES. The Company maintains controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed within 90 days of the filing date of this report, the chief executive officer and the chief financial officer of the Company concluded that the Company's disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely manner. The Company made no significant changes in its internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation of those controls by the chief executive officer and chief financial officer, including any corrective actions with regard to significant deficiencies and material weaknesses. 20 PART II OTHER INFORMATION Item 1. Legal Proceedings not applicable Item 2. Changes in Securities and Use of Proceeds not applicable Item 3. Defaults Upon Senior Securities not applicable Item 4. Submission of Matters to a Vote of Security Holders not applicable Item 5. Other Information not applicable Item 6. Exhibits and Reports on Form 8-K a). Exhibits 3.1 Certificate of Incorporation of the Company, filed as Exhibit 3(a)(2) to the Company's Post Effective Amendment No. 1 to Form S-18 (File No. 33-33594-FW) and incorporated by reference herein. 3.2 Certificate of Amendment of Certificate of Incorporation of the Company, dated March 24, 1992 and filed as Exhibit 4.2 to the Company's Form S-8 (File No. 333-44337) and incorporated by reference herein. 3.3 Amended and Restated Bylaws of the Company, filed as Exhibit 3(b)(2) to the Company's Post Effective Amendment No. 1 to Form S-8 (File No. 33-33594-FW) and incorporated by reference herein. 4.1 Specimen Common Stock Certificate, filed as Exhibit 4.4 to the Company's Registration Statement on Form S-3 (File No. 333-70823) and incorporated by reference herein. 21 4.2 Rights Agreement, dated as of June 23, 1999, between Craftmade International, Inc. and Harris Trust and Savings Bank, as Rights Agent, previously filed as an exhibit to Form 8-K dated July 9, 1999 (File No. 000-26667) and incorporated by reference herein. 10.1 Earnest Money contract and Design/Build Agreement dated May 8, 1995, between MEPC Quorum Properties II, Inc. and Craftmade International, Inc. (including exhibits), previously filed as an exhibit in Form 10-Q for the quarter ended December 31, 1995, and herein incorporated by reference. 10.2 Assignment of Rents and Leases dated December 21, 1995, between Craftmade International, Inc. and Allianz Life Insurance Company of North America (including exhibits), previously filed as an exhibit in Form 10-Q for the quarter ended December 31, 1995, and herein incorporated by reference. 10.3 Deed of Trust, Mortgage and Security Agreement made by Craftmade International, Inc., dated December 21, 1995, to Patrick M. Arnold, as trustee for the benefit of Allianz Life Insurance Company of North America (including exhibits), previously filed as an exhibit in Form 10-Q for the quarter ended December 31, 1995, and herein incorporated by reference. 10.4 Second Amended and Restated Credit Agreement dated November 14, 1995, among Craftmade International, Inc., Nations Bank of Texas, N.A., as Agent and the Lenders defined therein (including exhibits), previously filed as an exhibit in Form 10-Q for the quarter ended December 31, 1995, and herein incorporated by reference. 10.5 Lease Agreement dated November 30, 1995, between Craftmade International, Inc. and TSI Prime, Inc., previously filed as an exhibit in Form 10-Q for the quarter ended December 31, 1995, and herein incorporated by reference. 22 10.6 Revolving credit facility with Texas Commerce Bank, previously filed as an exhibit in Form 10-K for the year ended June 30, 1996, and herein incorporated by reference. 10.7 Agreement and Plan of Merger, dated as of July 1, 1998, by and among Craftmade International, Inc., Trade Source International, Inc., a Delaware corporation, Neall and Leslie Humphrey, John DeBlois, the Wiley Family Trust, James Bezzerides, the Bezzco Inc. Employee Retirement Trust and Trade Source International, Inc., a California corporation, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.8 Voting Agreement, dated July 1, 1998, by and among James R. Ridings, Neall Humphrey and John DeBlois, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.9 Third Amendment to Credit Agreement, dated July 1, 1998, by and among Craftmade International, Inc., a Delaware corporation, Trade Source International, Inc., a Delaware corporation, Chase Bank of Texas, National Association (formerly named Texas Commerce Bank, National Association) and Frost National Bank (formerly named Overton Bank and Trust), filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.10 Consent to Merger by Chase Bank of Texas, National Association and Frost National Bank, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.11 Employment Agreement, dated July 1, 1998, by and among Craftmade International, Inc., Trade Source International, Inc., a 23 Delaware corporation and Neall Humphrey, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.12 Employment Agreement, dated July 1, 1998, by and among Craftmade International, Inc., Trade Source International, Inc., a Delaware corporation, and Leslie Humphrey, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.13 Employment Agreement, dated July 1, 1998, by and among Craftmade International, Inc., Trade Source International, Inc., a Delaware corporation and John DeBlois, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.14 Fourth Amendment to Credit Agreement, dated April 2, 1999, by and among Craftmade International, Inc., a Delaware corporation, Durocraft International, Inc., a Texas Corporation, Trade Source International, Inc., a Delaware Corporation, Chase Bank of Texas, National Association and Frost National Bank, filed as Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q filed May 15, 2000 (File No. 000-26667) and herein incorporated by reference. 10.15 Letter Agreement Concerning Fifth Amendment to Credit Agreement, dated August 11, 1999, from Chase Bank of Texas, N.A. and Frost National Bank to Craftmade International, Inc., Durocraft International, Inc., Trade Source International, Inc., and C/D/R Incorporated, filed as Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q filed May 15, 2000 (File No. 000-26667) and herein incorporated by reference. 10.16 Sixth Amendment to Credit Agreement, dated November 12, 1999, by and among Craftmade International, Inc., a Delaware 24 corporation. Durocraft International, Inc., a Texas Corporation, Trade Source International, Inc., a Delaware Corporation, C/D/R Incorporated, a Delaware corporation, Chase Bank of Texas, National Association and Frost National Bank, filed as Exhibit 10.19 to the Company's Quarterly Report on Form 10-Q filed May 15, 2000 (File No. 000-26667) and herein incorporated by reference. 10.17 Employment Agreement dated October 25, 1999, between Kathy Oher and Craftmade International, Inc., filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K filed September 26, 2000 (File No. 000-26667) and herein incorporated by reference. 10.18 Seventh Amendment to Credit Agreement dated May 12, 2000, by and among Craftmade International, Inc., a Delaware corporation, Durocraft International, Inc., a Texas corporation, Trade Source International, Inc., a Delaware corporation, C/D/R Incorporated, a Delaware corporation, Chase Bank of Texas, National Association and Frost National Bank, filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K filed September 26, 2000 (File No. 000-26667) and herein incorporated by reference. 10.19 Craftmade International, Inc. 1999 Stock Option Plan, filed as Exhibit A to the Company's Proxy Statement on Schedule 14A filed October 4, 2000 (File No. 000-26667) and herein incorporated by reference. 10.20 Craftmade International, Inc. 2000 Non-Employee Director Stock Plan, filed as Exhibit B to the Company's Proxy Statement on Schedule 14A filed October 4, 2000 (File No. 000-26667) and herein incorporated by reference. 10.21 Eight Amendment to Credit Agreement dated February 12, 2001, by and among Craftmade International, Inc. a Delaware corporation, Durocraft International, Inc., a Texas 25 corporation, Trade Source International, Inc., a Delaware corporation, Design Trends, LLC, a Delaware limited liability company, C/D/R Incorporated, a Delaware corporation, The Chase Manhattan Bank and The Frost National Bank, filed as Exhibit 10.24 to the Company's Annual Report on Form 10-K filed May 14, 2001 (File No. 000-26667) and herein incorporated by reference. 10.22 Ninth Amendment to Credit Agreement dated June 29, 2001, by and among Craftmade International, Inc. a Delaware corporation, Durocraft International, Inc., a Texas corporation, Trade Source International, Inc., a Delaware corporation, Design Trends, LLC, a Delaware limited liability company, C/D/R Incorporated, a Delaware corporation, The Chase Manhattan Bank and The Frost National Bank, filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K filed September 26, 2001 (File No. 000-26667) and herein incorporated by reference. 10.23 Loan Agreement dated November 6, 2001, by and between Craftmade International, Inc., a Delaware corporation, and The Frost National Bank, a national banking association, filed as Exhibit 10.26 to the Company's quarterly Report on Form 10-Q filed February 14, 2002 (File No. 000-26667) and herein incorporated by reference. 10.24 Termination Agreement dated November 16, 2001, by and between Craftmade International, Inc., a Delaware corporation, and JP Morgan Chase Bank, filed as Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q filed February 14, 2002 (File No. 000-26667) and herein incorporated by reference. 26 10.25 Loan Agreement dated April 17, 2002, by and between Prime/Home Impressions, LLC, a North Carolina limited liability company, and Wachovia Bank, N.A., with Note and Security Agreement of Prime/Home Impressions, LLC, Guaranty Agreement of Craftmade International, Inc., Guaranty Agreement of Trade Source International, Inc., and Guaranty Agreement of Home Impressions, Inc., filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q filed November 14, 2002 (File No. 000-26667) and herein incorporated by reference. 10.26 Note and Security Agreement dated April 29, 2002, by Prime/Home Impressions LLC, a North Carolina limited liability company, to Wachovia Bank, N.A., with Security Agreement of Prime/Home Impressions, LLC, Guaranty Agreement of Craftmade International, Inc., and Guaranty Agreement of Trade Source International, Inc., filed as Exhibit 10.26 to the Company's Quarterly Report on Form 10-Q filed November 14, 2002 (File No. 000-26667) and herein incorporated by reference. 10.27 Modification, Renewal and Extension Agreement dated October 27, 2003, by and between The Frost National Bank, a national banking association, and Craftmade International, Inc., a Delaware corporation. 31.1 Certification of James R. Ridings, Chief Executive Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Kathleen B. Oher, Chief Financial Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of James R. Ridings, Chief 27 Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Kathleen B. Oher, Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 28 b). Reports on Form 8-K On August 20, 2003, the Company filed a Form 8-K concerning the issuance of a press release reported on Item 5. 29 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CRAFTMADE INTERNATIONAL, INC. (Registrant) Date November 14, 2003 /s/ James R. Ridings ------------------ --------------------------------- JAMES R. RIDINGS President and Chief Executive Officer Date November 14, 2003 /s/ Kathleen B. Oher ------------------ --------------------------------- KATHLEEN B. OHER Chief Financial Officer 30 Index to Exhibits Exhibit Number Description ------- ----------- 3.1 Certificate of Incorporation of the Company, filed as Exhibit 3(a)(2) to the Company's Post Effective Amendment No. 1 to Form S-18 (File No. 33-33594-FW) and incorporated by reference herein. 3.2 Certificate of Amendment of Certificate of Incorporation of the Company, dated March 24, 1992 and filed as Exhibit 4.2 to the Company's Form S-8 (File No. 333-44337) and incorporated by reference herein. 3.3 Amended and Restated Bylaws of the Company, filed as Exhibit 3(b)(2) to the Company's Post Effective Amendment No. 1 to Form S-18 (File No. 33-33594-FW) and incorporated by reference herein. 4.1 Specimen Common Stock Certificate, filed as Exhibit 4.4 to the Company's Registration Statement on Form S-3 (File No. 333-70823) and incorporated by reference herein. 4.2 Rights Agreement, dated as of June 23, 1999, between Craftmade International, Inc. and Harris Trust and Savings Bank, as Rights Agent, previously filed as an exhibit to Form 8-K dated July 9, 1999 (File No. 000-26667) and incorporated by reference herein. 10.1 Earnest Money contract and Design/Build Agreement dated May 8, 1995, between MEPC Quorum Properties II, Inc. and Craftmade International, Inc. (including exhibits), previously filed as an exhibit in Form 10-Q for the quarter ended December 31, 1995, and herein incorporated by reference. 10.2 Assignment of Rents and Leases dated December 21, 1995, between Craftmade International, Inc. and Allianz Life Insurance Company of North America (including exhibits), previously filed as an exhibit in Form 10-Q for the quarter ended December 31, 1995, and herein incorporated by reference. 10.3 Deed of Trust, Mortgage and Security Agreement made by Craftmade International, Inc., dated December 21, 1995, to Patrick M. Arnold, as trustee for the benefit of Allianz Life Insurance Company of North America (including exhibits), previously filed as an exhibit in Exhibit Number Description ------- ----------- Form 10-Q for the quarter ended December 31, 1995, and herein incorporated by reference. 10.4 Second Amended and Restated Credit Agreement dated November 14, 1995, among Craftmade International, Inc., Nations Bank of Texas, N.A., as Agent and the Lenders defined therein (including exhibits), previously filed as an exhibit in Form 10-Q for the quarter ended December 31, 1995, and herein incorporated by reference. 10.5 Lease Agreement dated November 30, 1995, between Craftmade International, Inc. and TSI Prime, Inc., previously filed as an exhibit in Form 10-Q for the quarter ended December 31, 1995, and herein incorporated by reference. 10.6 Revolving credit facility with Texas Commerce Bank, previously filed as an exhibit in Form 10-K for the year ended June 30, 1996, and herein incorporated by reference. 10.7 Agreement and Plan of Merger, dated as of July 1, 1998, by and among Craftmade International, Inc., Trade Source International, Inc., a Delaware corporation, Neall and Leslie Humphrey, John DeBlois, the Wiley Family Trust, James Bezzerides, the Bezzco Inc. Employee Retirement Trust and Trade Source International, Inc., a California corporation, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.8 Voting Agreement, dated July 1, 1998, by and among James R. Ridings, Neall Humphrey and John DeBlois, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.9 Third Amendment to Credit Agreement, dated July 1, 1998, by and among Craftmade International, Inc., a Delaware corporation, Trade Source International, Inc., a Delaware corporation, Chase Bank of Texas, National Association (formerly named Texas Commerce Bank, National Association) and Frost National Bank (formerly named Overton Bank and Trust), filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. Exhibit Number Description ------- ----------- 10.10 Consent to Merger by Chase Bank of Texas, National Association and Frost National Bank, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.11 Employment Agreement, dated July 1, 1998, by and among Craftmade International, Inc., Trade Source International, Inc., a Delaware corporation and Neall Humphrey, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.12 Employment Agreement, dated July 1, 1998, by and among Craftmade International, Inc., Trade Source International, Inc., a Delaware corporation and Leslie Humphrey, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.13 Employment Agreement, dated July 1, 1998, by and among Craftmade International, Inc., Trade Source International, Inc., a Delaware corporation and John DeBlois, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 15, 1998 (File No. 33-33594-FW) and herein incorporated by reference. 10.14 Fourth Amendment to Credit Agreement, dated April 2, 1999, by and among Craftmade International, Inc., a Delaware corporation, Durocraft International, Inc. a Texas corporation, Trade Source International, a Delaware corporation, Chase Bank of Texas, National Association and Frost National Bank, filed as Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q filed May 15, 2000 (File No. 000-26667) and herein incorporated by reference. 10.15 Letter Agreement Concerning Fifth Amendment to Credit Agreement, dated August 11, 1999, from Chase Bank of Texas, N.A. and Frost National Bank to Craftmade International, Inc., Durocraft International Inc., Trade Source International, Inc., and C/D/R Incorporated, filed as Exhibit 10.18 to the Company's Quarterly Report on Form 10-Q filed May 15, 2000 (File No. 000-26667) and herein incorporated by reference. 10.16 Sixth Amendment to Credit Agreement, dated November 12, 1999, by and among Craftmade International, Inc., a Delaware corporation, Durocraft International, Inc., a Texas corporation, Trade Source International, Inc., a Delaware corporation, C/D/R Incorporated, a Delaware corporation, Chase Bank of Texas, National Association Exhibit Number Description ------- ----------- and Frost National Bank, filed as Exhibit 10.19 to the Company's Quarterly Report on Form 10-Q filed May 15, 2000 (File No. 000-26667) and herein incorporated by reference. 10.17 Employment Agreement dated October 25, 1999, between Kathy Oher and Craftmade International, Inc., filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K filed September 26, 2000 (File No. 000-26667) and herein incorporated by reference. 10.18 Seventh Amendment to Credit Agreement dated May 12, 2000, by and among Craftmade International, Inc., a Delaware corporation, Durocraft International, Inc., a Texas corporation, Trade Source International, Inc., a Delaware corporation, C/D/R Incorporated, a Delaware corporation, Chase Bank of Texas, National Association and Frost National Bank, filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K filed September 26, 2000 (File No. 000-26667) and herein incorporated by reference. 10.19 Craftmade International Inc. 1999 Stock Option Plan, filed as Exhibit A to the Company's Proxy Statement on Schedule 14A filed October 4, 2000 (File No. 000-26667) and herein incorporated by reference. 10.20 Craftmade International Inc. 2000 Non-Employee Director Stock Plan, filed as Exhibit B to the Company's Proxy Statement on Schedule 14A filed October 4, 2000 (File No. 000-26667) and herein incorporated by reference. 10.21 Eighth Amendment to Credit Agreement dated February 12, 2001, by and among Craftmade International, Inc., a Delaware corporation, Durocraft International, Inc., a Texas corporation, Trade Source International, Inc., a Delaware corporation, Design Trends, LLC, a Delaware limited liability company, C/D/R Incorporated, a Delaware corporation, The Chase Manhattan Bank and The Frost National Bank, filed as Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q filed May 14, 2001 (File No. 000-26667) and herein incorporated by reference. 10.22 Ninth Amendment to Credit Agreement dated June 29, 2001, by and among Craftmade International, Inc. a Delaware corporation, Durocraft International, Inc., a Exhibit Number Description ------- ----------- Texas corporation, Trade Source International, Inc., a Delaware corporation, Design Trends, LLC, a Delaware limited liability company, C/D/R Incorporated, a Delaware corporation, The Chase Manhattan Bank and The Frost National Bank, filed as Exhibit 10.25 to the Company's Annual Report on Form 10-K filed September 26, 2001 (File No. 000-26667) and herein incorporated by reference. 10.23 Loan Agreement dated November 6, 2001, by and between Craftmade International, Inc., a Delaware corporation, and The Frost National Bank, a national banking association, filed as Exhibit 10.26 to the Company's Quarterly Report on Form 10-Q filed February 14, 2002 (File No. 000-26667) and herein incorporated by reference. 10.24 Termination agreement dated November 16, 2001, by and between Craftmade International, Inc., a Delaware corporation, and JPMorgan Chase Bank, filed as Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q filed February 14, 2002 (File No. 000-26667) and herein incorporated by reference. 10.25 Loan Agreement dated April 17, 2002, by and between Prime/Home Impressions, LLC, a North Carolina limited liability company, and Wachovia Bank, N.A., with Note and Security Agreement of Prime/Home Impressions, LLC, Guaranty Agreement of Craftmade International, Inc., Guaranty Agreement of Trade Source International, Inc., and Guaranty Agreement of Home Impressions, Inc., filed as Exhibit 10.25 to the Company's Quarterly Report on Form 10-Q filed November 14, 2002 (File No. 000-26667) and herein incorporated by reference. 10.26 Note and Security Agreement dated April 29, 2002, by Prime/Home Impressions LLC, a North Carolina limited liability company, to Wachovia Bank, N.A., with Security Agreement of Prime/Home Impressions, LLC, Guaranty Agreement of Craftmade International, Inc., and Guaranty Agreement of Trade Source International, Inc., filed as Exhibit 10.26 to the Company's Quarterly Report on Form 10-Q filed November 14, 2002 (File No. 000-26667) and herein incorporated by reference. Exhibit Number Description ------- ----------- 10.27 Modification, Renewal and Extension Agreement dated October 27, 2003, by and between The Frost National Bank, a national banking association, and Craftmade International, Inc., a Delaware corporation. 31.1 Certification of James R. Ridings, Chief Executive Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Kathleen B. Oher, Chief Financial Officer of the Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of James R. Ridings, Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Kathleen B. Oher, Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.