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SECURITIES AND EXCHANGE COMMISSION  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 MARCH 31, 2004 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 Number000-26667
 CRAFTMADE INTERNATIONAL, INC. 
  Delaware
    
    75-2057054(State or other jurisdiction
    
    (I.R.S. Employerof 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   [   ]. Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes   [X].   No   [   ]. 5,128,948
shares of Common Stock were outstanding as of May 17, 2004.




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES Index to Quarterly Report on Form 10-Q Part I.
    
    Financial InformationItem 1.
    
    Financial Statements (unaudited).Condensed Consolidated Statements of Income for the three and nine months ended March 31, 2004 and 2003.Condensed Consolidated Balance Sheets as of March 31, 2004 and June 30, 2003.Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2004 and 2003.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 InformationItem 1.
    
    Legal Proceedings.Item 2.
    
    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.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.Certification of James R. Ridings, CEOCertification of Kathleen B. Oher, CFOCertification of James R. Ridings, CEOCertification of Kathleen B. Oher, CFO
  2




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES 
 
 FOR THE THREE MONTHS ENDED
    
    FOR THE NINE MONTHS ENDEDMarch 31
    
    March 31,
    
    March 31,
    
    March 31,2004
    
    2003
    
    2004
    
    2003(In thousands except per share data)Net Sales
    
    $
    28,988
    
    
    $
    26,778
    
    
    $
    89,126
    
    
    $
    81,891Cost of goods sold
    
    
    20,526
    
    
    
    18,568
    
    
    
    62,800
    
    
    
    55,719Gross profit
    
    
    8,462
    
    
    
    8,210
    
    
    
    26,326
    
    
    
    26,172Selling, general and administrative expenses
    
    
    4,421
    
    
    
    4,560
    
    
    
    13,863
    
    
    
    13,714Interest expense, net
    
    
    226
    
    
    
    226
    
    
    
    565
    
    
    
    683Depreciation and amortization
    
    
    151
    
    
    
    162
    
    
    
    456
    
    
    
    478Total expenses
    
    
    4,798
    
    
    
    4,948
    
    
    
    14,884
    
    
    
    14,875Income before income taxes and minority interests
    
    
    3,664
    
    
    
    3,262
    
    
    
    11,442
    
    
    
    11,297Minority interests
    
    
    836
    
    
    
    1,043
    
    
    
    2,756
    
    
    
    3,459Income before income taxes
    
    
    2,828
    
    
    
    2,219
    
    
    
    8,686
    
    
    
    7,838Provision for income taxes
    
    
    1,046
    
    
    
    863
    
    
    
    3,170
    
    
    
    2,910Net income
    
    $
    1,782
    
    
    $
    1,356
    
    
    $
    5,516
    
    
    $
    4,928Basic earnings per common share
    
    $
    0.34
    
    
    $
    0.25
    
    
    $
    1.02
    
    
    $
    0.89Diluted earnings per common share
    
    $
    0.33
    
    
    $
    0.25
    
    
    $
    1.01
    
    
    $
    0.88Cash dividends declared per common share
    
    $
    0.10
    
    
    $
    0.07
    
    
    $
    0.30
    
    
    $
    0.21
 SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 3




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES 
  ASSETS March 31,
    
    June 30,2004
    
    2003(Unaudited)(In thousands except share data)Current assets:Cash
    
    $
    4,889
    
    
    $
    4,992Accounts receivable  net of
allowance for doubtful accounts of
$150 and $150 respectively
    
    
    17,622
    
    
    
    16,582Inventory
    
    
    15,057
    
    
    
    13,124Deferred income taxes
    
    
    358
    
    
    
    358Prepaid expenses and other current assets
    
    
    599
    
    
    
    671Total current assets
    
    
    38,525
    
    
    
    35,727Property and equipment, netLand
    
    
    1,535
    
    
    
    1,535Building
    
    
    7,784
    
    
    
    7,784Office furniture and equipment
    
    
    8,980
    
    
    
    8,818Leasehold improvements
    
    
    279
    
    
    
    27918,578
    
    
    
    18,416Less: accumulated depreciation
    
    
    9,172
    
    
    
    7,524Total property and equipment, net
    
    
    9,406
    
    
    
    10,892Goodwill, net of accumulated
amortization of $1,204 and $1,204 respectively
    
    
    4,735
    
    
    
    4,735Other assets
    
    
    12
    
    
    
    12Total other assets
    
    
    4,747
    
    
    
    4,747Total assets
    
    $
    52,678
    
    
    $
    51,366
 SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 4




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS EQUITY March 31,
    
    June 30,2004
    
    2003(Unaudited)(In thousands except share data)Current liabilities:Note payable  current
    
    $
    3,168
    
    
    $
    976Revolving lines of credit
    
    
    14,184
    
    
    
    12,000Accounts payable
    
    
    4,798
    
    
    
    4,486Commissions payable
    
    
    259
    
    
    
    287Income taxes payable
    
    
    1,305
    
    
    
    608Accrued customer allowances
    
    
    3,271
    
    
    
    3,058Other accrued expenses
    
    
    1,069
    
    
    
    914Total current liabilities
    
    
    28,054
    
    
    
    22,329Note payable  long term
    
    
    3,228
    
    
    
    4,517Deferred income taxes
    
    
    415
    
    
    
    415Minority interests
    
    
    1,711
    
    
    
    3,567Commitments and contingencies (Note 5)Stockholders equity:Series A cumulative, convertible
callable preferred stock, $1.00
par value, 2,000,000 shares
authorized; 32,000 shares issued
    
    
    32
    
    
    
    32Common stock, $.01 par value,
15,000,000 shares authorized, 9,464,535 and
9,424,035 shares issued, respectively
    
    
    95
    
    
    
    94Additional paid-in capital
    
    
    13,853
    
    
    
    13,584Unearned deferred compensation
    
    
    (19
    )
    
    
    (43
    )Retained earnings
    
    
    39,565
    
    
    
    35,68453,526
    
    
    
    49,351Less: treasury stock, 4,220,193 and
4,004,277 common shares at cost,
and 32,000 preferred shares at cost
    
    
    34,256
    
    
    
    28,813Total stockholders equity
    
    
    19,270
    
    
    
    20,538Total liabilities and stockholders equity
    
    $
    52,678
    
    
    $
    51,366
 SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 5




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES 
 
 FOR THE NINE MONTHS ENDEDMarch
    
    March31, 2004
    
    31, 2003(In thousands)Net cash provided by operating activities:
    
    
    8,394
    
    
    $
    10,944Cash flows from investing activities:Net additions to property and equipment
    
    
    (162
    )
    
    
    (213
    )Net cash used in investing activities
    
    
    (162
    )
    
    
    (213
    )Cash flows from financing activities:Net proceeds from lines of credit
    
    
    2,184
    
    
    
    3,242Principal payments on notes payable
    
    
    (1,197
    )
    
    
    (688
    )Proceeds from notes payable
    
    
    2,100
    
    
    
    Treasury stock repurchases
    
    
    (5,443
    )
    
    
    (7,746
    )Stock options exercised
    
    
    269
    
    
    
    162Cash dividends
    
    
    (1,635
    )
    
    
    (1,158
    )Distributions to minority interest members
    
    
    (4,613
    )
    
    
    (1,855
    )Net cash used in financing activities
    
    
    (8,335
    )
    
    
    (8,043
    )Net (decrease) increase in cash
    
    
    (103
    )
    
    
    2,688Cash at beginning of period
    
    
    4,992
    
    
    
    1,312Cash at end of period
    
    $
    4,889
    
    
    $
    4,000
 SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS 6




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF CRAFTMADE INTERNATIONAL, INC.
AND SUBSIDIARIES MARCH 31, 2004 (Unaudited) Note 1  BASIS OF PREPARATION AND PRESENTATION The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States of America and with the rules and regulations of the
Securities and Exchange Commission for interim financial reporting, 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 subsidiaries. As further discussed in
Note 3, the Company adopted new accounting guidance that required the consolidation
of Design Trends and PHI. The Company adopted this guidance as of January 1,
2004 and retroactively applied it to its previously issued financial
statements. 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 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. All financial information is in thousands (000s) except share data. 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. 7




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FOR THE THREE MONTHS ENDEDMarch 31,
    
    March 31,2004
    
    2003(In thousands except per share data)Net income, as reported
    
    $
    1,782
    
    
    $
    1,356Net income, proforma
    
    
    1,744
    
    
    
    1,317Basic earnings per share, as reported
    
    
    0.34
    
    
    
    0.25Basic earnings per share, pro forma
    
    
    0.33
    
    
    
    0.24Diluted earnings per share, as reported
    
    
    0.33
    
    
    
    0.25Diluted earnings per share, pro forma
    
    
    0.33
    
    
    
    0.24
 FOR THE NINE MONTHS ENDEDMarch 31,
    
    March 31,2004
    
    2003Net income, as reported
    
    $
    5,516
    
    
    $
    4,928Net income, proforma
    
    
    5,416
    
    
    
    4,827Basic earnings per share, as reported
    
    
    1.02
    
    
    
    0.89Basic earnings per share, pro forma
    
    
    1.00
    
    
    
    0.87Diluted earnings per share, as reported
    
    
    1.01
    
    
    
    0.88Diluted earnings per share, pro forma
    
    
    1.00
    
    
    
    0.86
 8




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF CRAFTMADE INTERNATIONAL, INC.
AND SUBSIDIARIES
March 31, 2004
(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
    
    FOR THE NINE MONTHS ENDEDMarch
    
    March
    
    March
    
    March31, 2004
    
    31, 2003
    
    31, 2004
    
    31, 2003(In thousands except per share data)Basic and Diluted EPSNumerator:Net Income
    
    $
    1,782
    
    
    $
    1,356
    
    
    $
    5,516
    
    
    $
    4,928Denominator:Common
Shares
Outstanding
    
    
    5,314
    
    
    
    5,384
    
    
    
    5,392
    
    
    
    5,565Basic EPS
    
    $
    0.34
    
    
    $
    0.25
    
    
    $
    1.02
    
    
    $
    0.89Denominator:Common
Shares
Outstanding
    
    
    5,314
    
    
    
    5,384
    
    
    
    5,392
    
    
    
    5,565Options
    
    
    46
    
    
    
    52
    
    
    
    48
    
    
    
    58Total Shares
    
    
    5,360
    
    
    
    5,436
    
    
    
    5,440
    
    
    
    5,623Diluted EPS
    
    $
    0.33
    
    
    $
    0.25
    
    
    $
    1.01
    
    
    $
    0.88
 9




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NOTE 3  ACCOUNTING CHANGES FIN 46 In January 2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46)
and amended it by issuing FIN 46R in December 2003. Among other things, FIN 46R generally
deferred the effective date of FIN 46 to the quarter ended March 31, 2004. Variable interest
entities (VIEs) are primarily entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and
rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. The Company has a 50% ownership interest in two limited liability companies (LLC or LLCs), Design Trends, LLC (Design Tends) and Prime/Home Impressions, LLC (PHI) collectively referred to herein as entities. In connection with the adoption of FIN 46R, the Company concluded that Design Trends and PHI are VIEs and that the
Company is the primary beneficiary. Pursuant to the provisions of FIN 46R, effective January 1, 2004, the Company began to consolidate Design Trends and PHI and restated its previously issued financial statements to reflect Design Trends and PHI as consolidated entities. Design Trends markets indoor lighting, including portable table lamps, floor lamps, chandeliers and wall sconces designed by the other member of the LLC. PHI markets various replacement parts for lamps, as well as fan accessories including decorative pull-chains, replacement switches, blade arms, blades and ceiling medallions. All
of PHIs sales are to mass merchandisers. Prior to the adoption of FIN 46, the
Company guaranteed the debt of PHI; thus, the recognition of the debt of PHI in the Condensed Consolidated Balance Sheets does not represent an incremental increase
in the claims on the general assets of the Company. Further, management believes that recognition of the other liabilities as a
result of consolidating Design Trends and PHI does not result in any incremental increase in the level of claims on the general assets of the Company; rather, the additional liabilities represent claims against the additional assets recognized by the Company as a result of the consolidations. Conversely, the additional assets
recognized as a result of consolidating Design Trends and PHI do not represent additional assets of the Company that could be used to satisfy claims by the creditors of the Company. The
following table presents the summarized financial information of the
Companys wholly owned subsidiaries and the Companys
consolidated VIEs, Design Trends and PHI,
as of March 31, 2004 and June 30, 2003 and for the three and nine months
ended March 31, 2004 and March 31, 2003. 10




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As of March 31, 2004


Consolidation andCraftmade/
    
    Design
    
    
    
    EliminationTSI
    
    Trends
    
    PHI
    
    Entries
    
    ConsolidatedTotal assets
    
    $
    40,023
    
    
    $
    7,923
    
    
    $
    4,732
    
    
    $
    0
    
    
    $
    52,678Total
liabilities and minority interests
    
    
    23,105
    
    
    
    6,873
    
    
    
    5,295
    
    
    
    (1,865
    )
    
    
    33,408Total stockholders equity
    
    
    16,711
    
    
    
    845
    
    
    
    (1,091
    )
    
    
    2,805
    
    
    
    19,270Total liabilities and
stockholders equity
    
    $
    39,816
    
    
    $
    7,718
    
    
    $
    4,204
    
    
    $
    940
    
    
    $
    52,678


As of March 31, 2003

Consolidation andCraftmade/
    
    Design
    
    
    
    EliminationTSI
    
    Trends
    
    PHI
    
    Entries
    
    ConsolidatedTotal assets
    
    $
    39,556
    
    
    $
    9,447
    
    
    $
    2,363
    
    
    $
    0
    
    
    $
    51,366Total
liabilities and minority interests
    
    
    22,805
    
    
    
    5,444
    
    
    
    1,256
    
    
    
    1,323
    
    
    
    30,828Total stockholders equity
    
    
    20,735
    
    
    
    3,882
    
    
    
    907
    
    
    
    (4,986
    )
    
    
    20,538Total liabilities and
stockholders equity
    
    $
    43,540
    
    
    $
    9,326
    
    
    $
    2,163
    
    
    ($
    3,663
    )
    
    $
    51,366


For the three months ended
March 31, 2004

Consolidation andCraftmade/
    
    Design
    
    
    
    EliminationTSI
    
    Trends
    
    PHI
    
    Entries
    
    ConsolidatedNet Sales
    
    $
    18,345
    
    
    $
    6,782
    
    
    $
    3,861
    
    
    
    
    
    
    $
    28,988Income
before income taxes and minority
interests
    
    
    1,992
    
    
    
    342
    
    
    
    1,330
    
    
    
    0
    
    
    
    3,664Net income
    
    $
    946
    
    
    $
    342
    
    
    $
    1,330
    
    
    
    ($836
    )
    
    $
    1,782


For the three months ended March 31, 2003

Consolidation andCraftmade/
    
    Design
    
    
    
    EliminationTSI
    
    Trends
    
    PHI
    
    Entries
    
    ConsolidatedNet Sales
    
    $
    17,878
    
    
    $
    7,165
    
    
    $
    1,735
    
    
    
    
    
    
    $
    26,778Income
before income taxes and minority
interests
    
    
    1,176
    
    
    
    1,506
    
    
    
    580
    
    
    
    0
    
    
    
    3,262Net income
    
    $
    313
    
    
    $
    1,506
    
    
    $
    580
    
    
    
    ($1,043
    )
    
    $
    1,356


11



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For the nine months ended March 31, 2004 Consolidation andCraftmade/
    
    Design
    
    
    
    EliminationTSI
    
    Trends
    
    PHI
    
    Entries
    
    ConsolidatedNet Sales
    
    $
    53,894
    
    
    $
    28,192
    
    
    $
    7,040
    
    
    
    
    
    
    $
    89,126Income
before income taxes and minority
interests
    
    
    5,927
    
    
    
    4,904
    
    
    
    611
    
    
    
    0
    
    
    
    11,442Net income
    
    $
    2,757
    
    
    $
    4,904
    
    
    $
    611
    
    
    
    ($2,756
    )
    
    $
    5,516
 For the nine months ended March 31, 2003 Consolidation andCraftmade/
    
    Design
    
    
    
    EliminationTSI
    
    Trends
    
    PHI
    
    Entries
    
    ConsolidatedNet Sales
    
    $
    52,861
    
    
    $
    23,416
    
    
    $
    5,614
    
    
    
    
    
    
    $
    81,891Income
before income taxes and minority
interests
    
    
    4,379
    
    
    
    5,168
    
    
    
    1,750
    
    
    
    0
    
    
    
    11,297Net income
    
    $
    1,469
    
    
    $
    5,168
    
    
    $
    1,750
    
    
    
    ($3,459
    )
    
    $
    4,928
 In
December 2003, the SEC issued Staff Accounting Bulletin (SAB) No. 104, Revenue
Recognition, which supercedes SAB 101, Revenue Recognition in Financial Statements.
SAB 104 rescinds the accounting guidance contained in SAB 101 specifically related to
multiple elements revenue managements, but leaves the remaining SAB 101 principles largely unchanged.
The adoption of SAB 104 did not have an impact on
Craftmades condensed consolidated results of operations or financial position. 12




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NOTE 4  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, mass merchandisers and
catalog houses. The TSI segment derives its revenue from ceiling mount lighting fixtures,
bath-strip lighting and outdoor lighting marketed solely to mass merchandisers. The following table presents information about the reportable segments: Craftmade
    
    TSI
    
    TotalFor the three months ended
March 31, 2004Net sales
    
    $
    12,289
    
    
    $
    16,699
    
    
    $
    28,988Operating profit
    
    
    2,194
    
    
    
    1,696
    
    
    
    3,890For the three months ended
March 31, 2003Net sales
    
    $
    11,146
    
    
    $
    15,632
    
    
    $
    26,778Operating profit
    
    
    1,521
    
    
    
    1,967
    
    
    
    3,488For the nine months ended
March 31, 2004Net sales
    
    $
    39,147
    
    
    $
    49,979
    
    
    $
    89,126Operating profit
    
    
    7,008
    
    
    
    4,999
    
    
    
    12,007For the nine months ended
March 31, 2003Net sales
    
    $
    35,569
    
    
    $
    46,322
    
    
    $
    81,891Operating profit
    
    
    5,366
    
    
    
    6,614
    
    
    
    11,980
 13




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NOTE 5  COMMITMENTS AND CONTINGENCIES The Company is a party to a lawsuit alleging patent infringement related to a
patent held by Lamps Plus, Inc. In November 2003, a jury verdict held that the
Company willfully infringed on the patent. The jury awarded damages of
$143,385, and Lamps Plus filed a motion to seek treble damages plus reasonable
attorneys fees and court costs. The motion for treble damages was denied. A
hearing will be held on June 28, 2004 to determine the amount of attorneys
fees to be awarded. Craftmade has an agreement with Dolan Northwest, LLC (the owner of the 50% of
Design Trends not owned by Craftmade) pursuant to which Dolan Northwest is
responsible for the judgment rendered in the lawsuit, plus all costs and
expenses, including legal fees and court costs, associated with the judgment.
Pat Dolan has unconditionally guaranteed the obligations of Dolan Northwest
under this agreement. In the event that both Dolan Northwest and Pat Dolan became insolvent or
otherwise unable to meet this obligation, the obligation could become a
liability of Design Trends or Craftmade. The Company believes this is unlikely
to occur, and therefore has not recorded a reserve for this contingent
liability. 14




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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 which could cause actual results to differ materially from those
anticipated by these forward-looking statements. Some of the important factors
which would cause actual results to differ materially from those in the
forward-looking statements include, among other things, the dependency of Trade
Source International, Inc. (TSI), Design Trends, LLC (Design Trends) and
Prime/Home Impression, 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, labor strikes, the ability of the
Company to import merchandise from foreign countries without significantly
restrictive tariffs, duties or quotas and the ability of the Company to source,
ship and deliver items from foreign countries to its U.S. distribution centers
at reasonable prices and rates and in a timely fashion, as well as other
uncertainties, all of which are difficult to predict and many of which are
beyond the control of the Company. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of
operations are based on our financial statements, which have been prepared in
accordance with accounting principals generally accepted in the United States
of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues, and expenses and related disclosures of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including our allowance for uncollectible accounts, inventory valuation and
obsolescence, long-lived tangible and intangible assets, income taxes, and
contingencies and litigation. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and 15




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liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions. In
our annual report on Form 10-K for the year ended June 30, 2003, we identified
and disclosed critical accounting policies, which included revenue recognition,
allowance for doubtful accounts and inventory. These critical accounting
policies affect significant judgments and estimates used in the preparation of
our financial statements. We reviewed our policies in conjunction with the
preparation of this report and have determined that those critical policies
remain and have not changed since June 30, 2003 except as required by a
recently issued accounting standard related to the Companys investments in its
previously unconsolidated 50% owned subsidiaries as described below. In January 2003, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46) and
amended it by issuing FIN 46R in December 2003. Among other things, FIN 46R
generally deferred the effective date of FIN 46 to the quarter ended March 31,
2004. Variable interest entities (VIEs) are primarily entities that lack
sufficient equity to finance their activities without additional financial
support from other parties or whose equity holders lack adequate decision
making ability. All VIEs with which the Company is involved must be evaluated
to determine the primary beneficiary of the risks and rewards of the VIE. The
primary beneficiary is required to consolidate the VIE for financial reporting
purposes. The Company has a 50% ownership interest in two limited liability companies
(LLC or LLCs), Design Trends, LLC (Design Tends) and Prime/Home
Impressions, LLC (PHI) collectively referred to herein as entities. In
connection with the adoption of FIN 46R, the Company concluded that Design
Trends and PHI are VIEs and that the Company is the primary beneficiary.
Pursuant to the provisions of FIN 46R, effective January 1, 2004, the Company
began to consolidate Design Trends and PHI and restated its previously issued
financial statements to reflect Design Trends and PHI as consolidated entities. Results of Operations Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003 Net Sales. Net sales for the Company increased $2,210,000 or 8.3% to
$28,988,000 for the three month period ended March 31, 2004 compared to
$26,778,000 for the same three month period last year. Net sales from the
Craftmade segment increased $1,143,000, or 10.3%, to $12,289,000 for the
three months ended March 31, 2004 from
$11,146,000 for the same three month period last year. The increase 16




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in sales of the Craftmade segment was primarily related to new product
introductions, an increase in outdoor lighting sales, and strong sales of
virtually all models of ceiling fans, particularly in the builder fan series,
in connection with the improvement in the overall economy and the housing
sector. Net sales of the TSI segment increased $1,067,000, or 6.8%, to $16,699,000 for
the three months ended March 31, 2004 from $15,632,000 for the same three-month
period last year. The increase in sales of the TSI segment was due to
increased sales of PHI, which generated $1,425,000 in incremental sales as a
result of the rollout of the new lamp replacement parts business in the second
quarter of fiscal 2004. The increase in sales of PHI was partially offset by a
decline in net sales of Design Trends and TSI. Sales of TSI and Design Trends
declined as a result of the annual line review of a mass retail customer. The
customer slowed its purchases of merchandise in the third quarter of fiscal
2004 in anticipation of replacing certain underperforming products with new
items expected to generate higher sales and margins. In addition, TSI and
Design Trends provided slightly greater sales allowances to the customer in the
third quarter of fiscal 2004 compared to the prior year period. The sales
allowances were granted in order to induce the customer to complete the re-set
of products as recommended by the Company during the line review. The re-set
is expected to generate higher sales and profits for the segment going forward. Gross Profit. Gross profit of the Company as a percentage of sales declined to
29.2% for the three months ended March 31, 2004, compared to 30.7% for the same
period of 2003. The gross profit percentage of the Craftmade segment declined
to 38.9% of net sales compared to 39.7% of net sales in the year ago period.
The decline in the gross margin of the Craftmade segment was partially due to
increased product costs as a result of a weaker U.S. dollar compared to the
Taiwan dollar, as well as a change in sales mix, with a greater portion of
sales being driven by Craftmades builders model ceiling fans, which carry a
lower gross profit percentage than the overall product mix. The gross profit percentage of the TSI segment declined to 22.0% of sales for
the three months ended March 31, 2004 compared to 24.2% of sales in the year
ago period. The decline was primarily due to a shift in the sales mix, with a
greater portion of the TSI segments sales being made to a lower margin
customer. Gross profit was also impacted by sales allowances provided to a
mass retail customer, as discussed above. Selling, General and Administrative Expenses. Total selling,
general and administrative (SG&A) expenses of the Company decreased $138,000
to $4,421,000 or 15.3% of net sales for the three months 17




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ended March 31, 2004 from $4,560,000 or 17.0% of net sales for the same three
month period last year. Total SG&A expenses of the segment declined $311,000
to $2,456,000 or 20.0% of sales compared to $2,767,000 or 24.8% of sales for
the same period in the previous fiscal year. The decline in SG&A expenses of
the Craftmade segment was primarily related to a decline in payroll and
administrative costs, as more resources of the Craftmade segment were allocated
to the operations of Design Trends and PHI, which reimburse Craftmade for their
respective portions of administrative costs. Total SG&A expenses of the TSI segment increased $173,000 to $1,966,000 or
11.8% of sales compared to $1,793,000 or 11.5% of sales for the same period in
the previous year. The increase in SG&A expenses of the TSI segment were
primarily due to an increase in payroll related costs to support the increase
in sales. Interest Expense. Net interest expense of the Company was unchanged at
$226,000 for the three months ended March 31, 2004 and the three-month period
ended March 31, 2003. The average outstanding balance on the Companys lines
of credit was slightly higher in the fiscal third quarter compared to the prior
year period, offset by a lower outstanding balance on the Companys facility
note payable. Interest rates in effect during the period were slightly lower
than in the prior year period. Minority Interests. As a result of a decline in income generated by the
Companys 50% owned subsidiaries, minority interests decreased $207,000 to
$836,000 for the three months ended March 31, 2004 from $1,043,000 for the same
period in the previous year. The decline was primarily related to sales
allowances incurred in connection with a mass retail customers annual line
review, as previously discussed. Provision For Income Taxes. The provision for income taxes increased $182,000
to $1,046,000 or 37.0% of income the three months ended March 31, 2004, from
$863,000 or 38.9% for the same period of the prior year. Results of Operations Nine Months Ended March 31, 2004 Compared to Nine Months Ended March 31, 2003 Net Sales. Net sales for the Company increased $7,235,000, or 8.8%, to
$89,126,000 for the nine-month period ended March 31, 2004 from $81,891,000 for
the same nine-month period last year.
Net sales of the Craftmade segment increased $3,578,000, or 10.1%, to
$39,147,000 for the nine months ended March 31, 2004 from $35,569,000 for the
same nine-month period last year. The increase in sales of the Craftmade
segment was due to an increased focus on sales and 18




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marketing and new product introductions, as well as the overall strength of the
housing sector of the U.S. economy. Net sales of the TSI segment increased $3,657,000, or 7.9% to $49,979,000 for
the nine months ended March 31, 2004 from $46,322,000 for the same nine-month
period last year. The increase was primarily attributable to the roll out of
lamp replacement parts business by PHI in the second quarter of fiscal 2004, as
well as strong sales increases in Design Trends products that were rolled out
to a new customer in fiscal 2003. Gross Profit. Gross profit of the Company as a percentage of sales declined to
29.5% of sales compared to 32.0% of sales for the nine months ended March 31,
2004 and 2003, respectively. Gross profit of the Craftmade segment was
relatively unchanged at 39.4% of net sales for the nine months ended March 31,
2004 compared to 39.6% for the same period of 2003. The gross margin of the
TSI segment declined to 21.8% of sales for the nine months ended March 31, 2004
compared to 26.1% of sales in the year ago period. The decline in the gross
profit percentage of TSI was primarily due to a reduction in revenue as a
result of a $2,100,000 sales allowance provided in connection with the rollout
of a new product at PHI. The decline was partially offset by a write down of
slow moving inventory in the amount of $426,000 in the nine-month period ended
March 31, 2003 that did not occur in the nine-month period ended March 31,
2004. Selling, General and Administrative Expenses. Total selling, general and
administrative (SG&A) expenses of the Company increased $149,000 to
$13,863,000 or 15.6% of net sales for the nine months ended March 31, 2004 from
$13,714,000 or 16.7% of net sales for the same nine-month period last year.
Total SG&A expense of the Craftmade segment declined $312,000 to $8,007,000 or
20.5% of sales compared to $8,319,000 or 23.4% of sales for the same period in
the previous year. The decline in SG&A expense as a percent of sales is
primarily attributable to the effect of increased sales leveraging down fixed
SG&A expenses. The decline in SG&A expenses in total dollars was primarily
related to a decline in payroll and administrative costs due to more resources
of the Craftmade segment being allocated to the operations of Design Trends and
PHI, as discussed above. Total SG&A expenses of the TSI segment increased $461,000 to $5,856,000 or
11.7% of sales for the nine-month period ended March 31, 2004 from $5,395,000
or 11.6% of sales for the same period in the previous year. TSIs SG&A
expenses as a percentage of sales was relatively unchanged. The increase in total SG&A dollars was primarily
attributable to an increase in selling costs associated with the increase in
sales of PHI and Design Trends. Resources of the Craftmade segment were
redeployed to the TSI segment to support the increase in sales. 19




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Interest Expense. Net interest expense of the Company decreased $118,000 to
$565,000 for the nine months ended March 31, 2004 from $683,000 for the same
nine-month period last year. This decrease was primarily the result of a
decline in the average outstanding balance on the Companys facility note
payable, combined with lower interest rates in effect during the period. Minority Interests. As a result of a decline in income generated by the
Companys 50% owned subsidiaries, minority interests decreased $703,000 to
$2,756,000 for the nine months ended March 31, 2004 compared to $3,459,000 for
the same period in the previous year. The decline was primarily related to the
$2,100,000 sales allowance provided by PHI to a mass retail customer, as
previously discussed. Provision for Income Taxes. The provision for income taxes increased to
$3,170,000 or 36.5% of income for the nine months ended March 31, 2004, from
$2,910,000 or 37.1% for the same period of the prior year. LIQUIDITY AND CAPITAL RESOURCES The Companys cash decreased $103,000 from $4,992,000 at June 30, 2003 to
$4,889,000 at March 31, 2004. The Companys operating activities provided cash
of $8,394,000, which was primarily attributable to income from operations
before minority interest expense. The $162,000 of cash used in investing activities related to additions to
property and equipment, which consisted primarily of warehouse racking, as well
as purchases of office equipment in connection with the relocation of employees
from the California office to the Companys headquarters in Coppell, Texas. Cash used in financing activities of $8,335,000 was primarily the result of (i)
repurchases of the Companys outstanding common stock of $5,443,000, (ii)
distributions to minority interest members of $4,613,000, and (iii) cash
dividends of $1,635,000, and (iv) principal payments on the Companys facility
note payable of $1,197,000. These amounts were partially offset by (i) net
advances on the Companys revolving lines of credit of $2,184,000, (ii)
advances from PHIs note payable of $2,100,000 and (iii)proceeds from stock
options exercised of $269,000. At March 31, 2004, subject to continued compliance with certain covenants and
restrictions, the Company had a $20,000,000 line of credit with The Frost
National Bank (Frost), of which $12,471,000 had been utilized. The Frost
line of credit matures on October 31, 2005. 20




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With respect to the Companys 50%-owned subsidiaries, PHI has a $2,000,000 line
of credit (the $2 Million Line of Credit) with Wachovia
Bank, N.A. (Wachovia), at
an interest rate equal to the Monthly LIBOR index plus 2%, which expires October 1, 2004.
There was an outstanding balance of $1,713,000 on the $2 Million Line of Credit at
March 31, 2004. PHI has a $500,000 three-year note payable to Wachovia (the
$500 Thousand Note) maturing on July 29, 2005, of which $236,000 was
outstanding at March 31, 2004. The $500 Thousand Note bears interest at a rate
equal to the Monthly LIBOR Index plus 2.5%. In addition, on November 24, 2003,
PHI entered into a loan agreement with Wachovia (the $2.1 Million Note)
whereby Wachovia agreed to advance up to $2,100,000 to PHI, subject to PHIs
continued compliance with certain loan covenants specified by the agreement.
The $2.1 Million Note bears interest at a rate equal to the Monthly LIBOR Index
plus 2.5%. At March 31, 2004, there was a $2,100,000 balance outstanding under
the $2.1 million Note, which is scheduled to mature on March 15, 2005.
Craftmade agreed to be the guarantor of the $2 Million Line of Credit, the $500
Thousand Note and the $2.1 Million Note for business purposes, in order to
induce the lender to provide these loans to PHI. The Companys management believes that its current lines of credit, combined
with cash flows from operations, are adequate to fund the Companys current
operating needs, debt service payments, treasury stock purchases, and any
future dividend payments, as well as fund its projected growth over the next
twelve months. At March 31, 2003, $4,060,000 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. Fanthing, Craftmades ceiling fan vendor, has provided Craftmade with a
$1,000,000 credit limit, 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. TSI, PHI and Design Trends maintained inventory levels of $1,119,000,
$1,270,000 and $2,681,000 respectively at March 31, 2004. The sales of each of
these entities are highly concentrated with one mass 21




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merchandiser customer.
Should the revenues generated by TSI, PHI, and Design Trends from their
programs with this particular mass merchandiser be at levels significantly
lower 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. On December 9, 2003, the Companys Board of Directors authorized the Companys
management to repurchase up to 500,000 shares of the Companys outstanding
common stock. As of May 12, 2004 the Company had repurchased 331,310 shares at
an aggregate cost of $8,269,000 under this program. 
 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. At March 31, 2004, the Company had a $20,000,000 line of credit with The Frost
National Bank (the Craftmade Line of Credit) at an interest rate of prime
(4.00% at March 31, 2004) less .5%, of which $12,471,000 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 March 31, 2004, PHI had a $2 Million Line of Credit with Wachovia at an
interest rate equal to the one-month LIBOR plus 2%. At March 31, 2004, the
one-month LIBOR rate was equal to 1.10%. There was a $1,713,000 outstanding
balance on the line of credit at March 31, 2004. The $2 Million Line of
Credit is due on demand; however, if no demand is made, it is scheduled to
mature October 1, 2004. PHI has a $500 Thousand Note payable to Wachovia maturing on July 29, 2005, of
which $236,000 was outstanding at March 31, 2004. The note bears interest at a
rate equal to the Monthly LIBOR Index plus 2.5%. In addition, on November 24,
2003, PHI entered into the $2.1 million Note with Wachovia whereby Wachovia
agreed to advance up to $2,100,000 to PHI, subject to PHIs continued
compliance with certain loan covenants specified by the agreement. At March 31,
2004, there was a $2,100,000 balance outstanding under the $2.1 Million Note,
which is scheduled to mature on March 15, 2005. 22




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The short-term nature of each of the Craftmade Line of Credit and
the $2 Million Line of Credit, the $500 Thousand Note and the $2.1 Million Note
(collectively, 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 $125,000. Consequently, an increase in
the prime rate of five percentage points (5%) would result in an estimated
annualized increase in interest expense for the Company of approximately
$625,000. 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 $40,000. 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 $200,000. The Company currently purchases a substantial amount of ceiling fans and other
products of its Craftmade segment 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 May 6, 2004 one U.S. dollar
equaled $33.26 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 March 31, 2004, the Company purchased
approximately $3,776,000 of products from Fanthing. Under the 23




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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 $378,000, based on the Companys purchases during the
fiscal quarter ended March 31, 2004, (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 $1,888,000, based on the
Companys purchases during the fiscal quarter ended March 31, 2004(on an
annualized basis). A $10 incremental appreciation of the Taiwanese dollar would
result in an increase of approximately $3,776,000 on an annualized basis, based
on the Companys purchases during the fiscal quarter ended March 31, 2004(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 March 31, 2004. Consequently, these amounts are not necessarily
indicative of the effect of such changes with respect to an entire year. 
 ITEM 4 CONTROLS AND PROCEDURES. As of the end of the period covered by this Form 10-Q, the Company carried out
an evaluation, under the supervision and with the participation of its chief
executive officer and chief financial officer, of the effectiveness of the
design and operation of its disclosure controls and procedures (as defined in
Rule 13a-15e or 15d-15e under the Securities Exchange Act of 1934). In making this evaluation the Company has considered reportable conditions
(as defined under standards established by the American Institute of Certified
Public Accountants) that were identified in a letter dated April 19, 2004
addressed to the Companys Chief Executive Officer from PricewaterhouseCoopers
LLP (PWC), the Companys independent auditors, and communicated to the
Companys Audit Committee. PWC and management reported to the Audit Committee
that none of the reportable conditions is believed to be a material weakness
(as defined under standards established by the American Institute of Certified
Public Accountants). The reportable conditions included conditions surrounding
internal controls regarding: calculation of the weighted average number of
shares outstanding; timely cash reconciliation; estimation of inventory
reserves; software used for financial consolidation; past audit adjustments;
supervision and review controls regarding journal entries; accounting for new
product rollouts with mass merchandisers; discipline around financial
reporting; depth of financial accounting and reporting personnel; and policies
and procedures used to develop accruals and estimates. 24




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From January 2004 to the present, the Company has been in engaged in extensive
remediation efforts with respect to the foregoing reportable conditions,
including engaging an outside internal control consultant to evaluate, analyze
and document all of the Companys internal controls over its financial
reporting. In connection with the Companys evaluation of its financial and
internal controls, the Company considered the mitigating controls that have
been implemented at the direction of its outside internal control consultant.
The Companys efforts to strengthen its financial and internal controls
continue and the Company expects to complete remediation of all of the
reportable conditions by the end of its fiscal year 2004. Based on this evaluation, the Companys chief executive officer and chief
financial officer concluded that as of the evaluation date, such disclosure
controls and procedures were reasonably designed to ensure that information
required to be disclosed by the Company in reports it files or submits under
the Exchange Act is properly recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission. Other than as described above, since the evaluation date by the Companys
management of its internal controls over financial reporting, there have not
been any changes in the Companys internal controls over financial reporting
that has materially affected, or is reasonably likely to materially affect the
Companys internal controls over financial reporting. 25




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PART II OTHER INFORMATION 
 Item 1. Legal Proceedings On August 8, 2001, Lamps Plus, Inc. and Pacific Coast Lighting (collectively
Lamps Plus) sued several defendants, including Patrick S. Dolan, Dolan
Northwest, LLC, Design Trends, and Craftmade International, Inc. (collectively,
the Craftmade Parties), for alleged patent infringement in the United States
District Court for the Northern District of Texas. The suit alleged that the
Craftmade Parties infringed two patents  a design patent and a utility patent
- held by Lamps Plus related to a design for a free-standing torchiere lamp
with attached sidelights. The suit sought a declaration that the two patents
were infringed, treble damages, a preliminary and permanent injunction from
further alleged infringement, attorneys fees, and other unspecified damages.
The Craftmade Parties denied the allegations of patent infringement, asserting
affirmative defenses, and counterclaimed for a declaration that the patents are
invalid, not infringed, and unenforceable. On November 3, 2003, the lawsuit went to trial and on November 20, 2003, the
jury found that the Craftmade Parties directly and indirectly infringed the
utility patent with four of the five lamp models, and that their infringement
was willful. The jury found that the Craftmade Parties did not infringe the
design patent for any of the five accused lamp models. The jury further found
that neither patent was invalid or unenforceable, and awarded damages against
Dolan, Design Trends L.L.C., and Craftmade International, Inc., jointly and
severally, in the amount of $143,385. Lamps Plus has filed a motion to seek treble damages based on the jurys
finding that the infringement by the Craftmade Parties was willful, and their
reasonable attorneys fees and costs of court. The Craftmade Parties have filed a renewed motion for judgment as a matter of
law and alternative motion for new trial, requesting that the court enter a
judgment, notwithstanding the jury verdict, that the Craftmade Parties did not
infringe the utility patent and that both patents are invalid and
unenforceable. The Craftmade Parties also requested that they be awarded their
attorneys fees and costs if the court finds that Lamps Plus committed
inequitable conduct in connection with obtaining their patents. The Craftmade
Parties also have filed a motion for partial judgment on the jurys verdict,
seeking that judgment be entered in favor of the Craftmade Parties on the
jurys finding that they did not infringe the design patent and that one of the
five accused lamp models did not infringe the utility patent. 26




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The outcome of this litigation is uncertain. All post-verdict motions are
still pending, and a final judgment has not yet been entered. Therefore, there
can be no assurance that judgment will not be entered in Lamps Plus favor and
that treble damages and attorneys fees will not be awarded against the
Craftmade Parties. Success by Lamps Plus in obtaining a permanent injunction
could prevent the Craftmade Parties from offering any of the accused lamp
models for sale. With regard to the foregoing litigation (the Lawsuit), the Craftmade Parties
entered into an agreement (the Agreement), that sets forth the
responsibilities of the Craftmade Parties for payment of additional fees, costs
and expenses of the Lawsuit, along with the rights to any recovery that might
be had by reason of the Lawsuit. Pursuant to the Agreement, Design Trends
(which is owned jointly by Craftmade and Dolan Northwest, LLC) agreed to pay
the first $150,000 of legal fees and expenses incurred by the Parties after
February 21, 2003. On April 16, 2003, Dolan Northwest became responsible for
all legal fees and expenses incurred by the Craftmade Parties in connection
with the Lawsuit from that date forward, and agreed to indemnify and hold
harmless Craftmade and Design Trends from and against any and all claims,
liabilities, or losses arising out of the legal fees and expenses incurred in
the defense of the Lawsuit after February 21, 2003. Pursuant to the Agreement, Dolan Northwest is solely responsible for the
payment of any judgment which may be rendered in the Lawsuit against any of the
Craftmade Parties and has agreed to indemnify and hold harmless Craftmade and
Design Trends from and against any and all liabilities, losses, damages, costs
or other expenses associated with said judgment. Dolan Northwest is also
responsible for all additional legal fees and expenses (including any
supercedeas bond posted), which may be incurred in the prosecution or defense
of any appeal, perfected by any party to the Lawsuit. Dolan Northwest has
additionally agreed to assume and be responsible for all obligations of Design
Trends to indemnify Lowes Companies, Inc. (who was also named as a defendant
in the Lawsuit) or any of its subsidiaries for any loss or damage incurred as a
result of the Lawsuit. In the event of a recovery in the Lawsuit in favor of
any or all of the Craftmade Parties, Dolan is entitled to retain all of the
proceeds of such recovery. As an accommodation and convenience to Dolan Northwest, Design Trends has
agreed to advance the funds necessary to pay the legal fees and expenses for
which Dolan Northwest will be responsible as well as any final judgment that
may be entered against any of the Craftmade Parties in the Lawsuit. Any such
advances have been and will continue to be treated by Design Trends as loans
and are charged 27




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##### Table of Contents



against Dolan Northwests capital account in Design Trends. In the
event that Dolan Northwests capital account is insufficient to pay any such
fees and expenses for which Dolan Northwest is responsible under the Agreement,
Design Trends shall notify in writing both Pat Dolan and Dolan Northwest of
such deficiency and Dolan Northwest shall reimburse Design Trends for any such
fees and expenses (including any final judgment) within ten days. Pat Dolan
has agreed to unconditionally guarantee the obligations of Dolan Northwest
under this Agreement. 28




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##### Table of Contents



Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities ISSUER PURCHASES OF EQUITY SECURITIES (d) Maximum Number (or(b)
    
    (c) Total Number of
    
    Approximate Dollar Value)(a) Total
    
    Average
    
    Shares (or Units)
    
    of Shares (or Units) thatNumber of
    
    Price Paid
    
    Purchased as Part of
    
    May Yet Be PurchasedShares (or Units)
    
    per Share
    
    Publicly Announced
    
    Under the Plans orPeriod
    
    Purchased
    
    (or Unit)
    
    Plans or Programs
    
    ProgramsJanuary 1, 2004 to January 31, 2004
    
    
    61,754
    
    
    $
    25.35
    
    
    
    61,754
    
    
    
    401,646February 1, 2004 to February 29, 2004
    
    
    117,562
    
    
    $
    25.20
    
    
    
    117,562
    
    
    
    284,084March 1, 2004 to March 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    284,084Total
    
    
    179,316
    
    
    
    
    
    
    
    179,316
 On December 9, 2003 the Companys Board of Directors authorized the Companys management to
repurchase up to 500,0000 shares of the Companys outstanding common stock. No expiration date
was specified for the repurchase program; however, it is estimated to be completed within twelve
months of the authorization. No shares were purchased by the Company other than through publicly announced plans or programs. 
 Item 3. Defaults Upon Senior Securities not applicable 
 Item 4. Submission of Matters to a Vote of Stockholders not applicable 
 Item 5. Other Information not applicable 29




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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.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
 30




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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.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 hereinincorporated 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
 31




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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 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
 32




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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 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
 33




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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 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
 34




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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.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,
filed as Exhibit 10.27 to the Companys Quarterly Report
on Form 10-Q filed November 14, 2003 (File No. 000-26667) and herein incorporated by reference.
 35




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10.28
    
    Note and Security Agreement dated
November 24, 2003 by Prime/Home Impressions LLC, a North
Carolina limited liability company, to Wachovia Bank,
N.A., with Security Agreement of Prime/Home Impressions,
LLC, and Guaranty Agreement of Craftmade International,
Inc., filed as Exhibit 10.28 to the Companys Quarterly
Report on Form 10-Q filed February 17, 2004 (File No.
000-26667) and herein incorporated by reference.10.29
    
    Agreement regarding Lamps Plus, Inc.
Litigation, entered into on December 31, 2003 and
effective February 21, 2003, by and among Craftmade
International, Inc., a Delaware corporation, Design
Trends, LLC, a Delaware limited liability company, Dolan
Northwest, LLC, an Oregon limited liability company and
Patrick S. Dolan, filed as Exhibit 10.29 to the Companys
Quarterly Report on Form 10-Q filed February 17, 2004
(File No. 000-26667) and herein incorporated by
reference.*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.
   *
    
    Each document marked with an asterisk is filed herewith.  b). Reports on Form 8-K none 36




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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 May 17, 2004
    
    /s/ James R. RidingsJAMES R. RIDINGSPresident and ChiefExecutive OfficerDate May 17, 2004
    
    /s/ Kathleen B. OherKATHLEEN B. OHERChief Financial Officer
 37




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Index to Exhibits ExhibitNumber
    
    Description3.1
    
    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




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ExhibitNumber
    
    Descriptionexhibits), 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.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




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ExhibitNumber
    
    Descriptionto 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 and




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ExhibitNumber
    
    DescriptionFrost 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 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




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ExhibitNumber
    
    DescriptionAnnual 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.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, filed as Exhibit
10.27 to the Companys Quarterly Report on Form 10-Q filed November 14,
2003 (File No. 000-26667) and
herein incorporated by reference.10.28
    
    Note and Security Agreement dated November 24, 2003 by Prime/Home
Impressions LLC, a North Carolina limited liability company, to Wachovia
Bank, N.A., with Security




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##### Table of Contents



ExhibitNumber
    
    DescriptionAgreement of Prime/Home Impressions, LLC, and
Guaranty Agreement of Craftmade International, Inc., filed as Exhibit
10.28 to the Companys Quarterly Report on Form 10-Q filed February 17,
2004 (File No. 000-26667) and herein incorporated by reference.10.29
    
    Agreement Regarding Lamps Plus, Inc. Litigation, entered into on
December 31, 2003 and effective February 21, 2003, by and among Craftmade
International, Inc., a Delaware Corporation, Design Trends, LLC, a
Delaware limited liability company, Dolan Northwest, LLC, an Oregon
limited liability company and Patrick S. Dolan, filed as Exhibit
10.29 to the Companys Quarterly Report on Form 10-Q filed February 17,
2004 (File No. 000-26667) and herein incorporated by reference.*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.
   *
    
    Each document marked with an asterisk is filed herewith.