##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the quarterly period ended March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 Commission File Number 000-26667
 CRAFTMADE INTERNATIONAL, INC.
  DELAWARE
(State or other jurisdiction of 
incorporation or organization)
    
    75-2057054
(I.R.S. employer
identification no.)
 650 SOUTH ROYAL LANE, SUITE 100
COPPELL, TEXAS 75019
 (972) 393-3800
 þ o
 o o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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##### 



CRAFTMADE INTERNATIONAL, INC.
AND SUBSIDIARIES
 TABLE OF CONTENTS
 Part I. Financial Information
    
    
    1Item 1. Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures About Market
Risk
    
    
    36Item 4. Controls and Procedures
    
    
    36Part II. Other Information
    
    
    37Item 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
    
    
    37Item 3. Defaults Upon Senior Securities
    
    
    37Item 4. Submission of Matters to a Vote of Security Holders
    
    
    37Item 5. Other Information
    
    
    37Item 6. Exhibits
    
    
    38EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I
FINANCIAL INFORMATION
 
  CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    52,000
    
    
    $
    54,918
    
    
    $
    119,427
    
    
    $
    98,468Cost of goods sold
    
    
    (43,407
    )
    
    
    (44,226
    )
    
    
    (94,658
    )
    
    
    (73,732
    )Gross profit
    
    
    8,593
    
    
    
    10,692
    
    
    
    24,769
    
    
    
    24,736Gross profit as a percentage of net sales
    
    
    16.5
    %
    
    
    19.5
    %
    
    
    20.7
    %
    
    
    25.1
    %Selling, general and administrative expenses
    
    
    (7,886
    )
    
    
    (8,848
    )
    
    
    (23,416
    )
    
    
    (19,366
    )Depreciation and amortization
    
    
    (294
    )
    
    
    (210
    )
    
    
    (794
    )
    
    
    (628
    )Total operating expenses
    
    
    (8,180
    )
    
    
    (9,058
    )
    
    
    (24,210
    )
    
    
    (19,994
    )Income from operations
    
    
    413
    
    
    
    1,634
    
    
    
    559
    
    
    
    4,742Interest expense, net
    
    
    (333
    )
    
    
    (524
    )
    
    
    (1,108
    )
    
    
    (1,144
    )Other income (expense)
    
    
    (125
    )
    
    
    139
    
    
    
    (124
    )
    
    
    139Income (loss) before income taxes and minority interest
    
    
    (45
    )
    
    
    1,249
    
    
    
    (673
    )
    
    
    3,737Income tax (expense) / benefit
    
    
    (1
    )
    
    
    (343
    )
    
    
    307
    
    
    
    (929
    )Income (loss) before minority interest
    
    
    (46
    )
    
    
    906
    
    
    
    (366
    )
    
    
    2,808Minority interest
    
    
    (89
    )
    
    
    (267
    )
    
    
    (443
    )
    
    
    (1,069
    )Net income (loss)
    
    $
    (135
    )
    
    $
    639
    
    
    $
    (809
    )
    
    $
    1,739Weighted average common shares outstanding:Basic
    
    
    5,705
    
    
    
    5,694
    
    
    
    5,705
    
    
    
    5,366Diluted
    
    
    5,705
    
    
    
    5,700
    
    
    
    5,705
    
    
    
    5,373Basic earnings (loss) per common share
    
    $
    (0.02
    )
    
    $
    0.11
    
    
    $
    (0.14
    )
    
    $
    0.32Diluted earnings (loss) per common share
    
    $
    (0.02
    )
    
    $
    0.11
    
    
    $
    (0.14
    )
    
    $
    0.32Cash dividends declared per common share
    
    $
    
    
    
    $
    0.12
    
    
    $
    
    
    
    $
    0.36
 
 1




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##### Table of Contents



CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
 March 31,
    
    
    June 30,2009
    
    
    2008(Unaudited)ASSETSCurrent assetsCash
    
    $
    1,687
    
    
    $
    1,269Accounts receivable, net
    
    
    45,002
    
    
    
    23,644Inventories, net
    
    
    23,267
    
    
    
    22,420Income taxes receivable
    
    
    1,620
    
    
    
    1,485Deferred income taxes
    
    
    1,312
    
    
    
    1,332Prepaid expenses and other current assets
    
    
    2,400
    
    
    
    2,574Total current assets
    
    
    75,288
    
    
    
    52,724Property and equipment, net
    
    
    11,297
    
    
    
    11,060Goodwill
    
    
    14,745
    
    
    
    14,419Other intangibles, net
    
    
    1,146
    
    
    
    1,300Other assets
    
    
    2,462
    
    
    
    2,457Total non-current assets
    
    
    29,650
    
    
    
    29,236Total assets
    
    $
    104,938
    
    
    $
    81,960LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS EQUITYCurrent liabilitiesBook overdrafts
    
    $
    22
    
    
    $
    182Accounts payable
    
    
    17,659
    
    
    
    8,411Other accrued expenses
    
    
    2,063
    
    
    
    3,329Current portion of long-term obligations
    
    
    34,466
    
    
    
    507Total current liabilities
    
    
    54,210
    
    
    
    12,429Non-current liabilitiesLong-term obligations
    
    
    9,983
    
    
    
    27,759Deferred income taxes
    
    
    1,117
    
    
    
    1,117Total non-current liabilities
    
    
    11,100
    
    
    
    28,876Total liabilities
    
    
    65,310
    
    
    
    41,305Minority interest
    
    
    3,254
    
    
    
    3,562Stockholders equityPreferred stock, $1.00 par value, 2,000,000 shares authorized;
nil shares issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 15,000,000 shares authorized;
10,204,420 shares issued
    
    
    102
    
    
    
    102Additional paid-in capital
    
    
    22,305
    
    
    
    22,215Retained earnings
    
    
    52,093
    
    
    
    52,902Less: treasury stock, 4,499,920 common shares at cost
    
    
    (38,126
    )
    
    
    (38,126
    )Total stockholders equity
    
    
    36,374
    
    
    
    37,093Total liabilities, minority interest and stockholders equity
    
    $
    104,938
    
    
    $
    81,960
 
 2




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##### Table of Contents



CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 Nine Months EndedMarch 31,
    
    
    March 31,2009
    
    
    2008Net cash used in operating activities
    
    $
    (13,498
    )
    
    $
    (3,601
    )Cash flows from investing activitiesAcquisition of assets of Woodard, LLC.
    
    
    
    
    
    
    (16,135
    )Additional contingent consideration
    
    
    (473
    )
    
    
    (486
    )Additions property, equipment and tooling
    
    
    (908
    )
    
    
    (436
    )Cash used in investing activities
    
    
    (1,381
    )
    
    
    (17,057
    )Cash flows from financing activitiesNet proceeds from/(payments) on note payable
    
    
    (344
    )
    
    
    10,668Net proceeds from lines of credit
    
    
    16,560
    
    
    
    13,125Cash dividends
    
    
    
    
    
    
    (1,874
    )Distributions to minority interest members
    
    
    (750
    )
    
    
    (1,225
    )Increase/(decrease) in book overdrafts
    
    
    (158
    )
    
    
    47Principal payments on capital lease
    
    
    (11
    )
    
    
    (26
    )Net cash provided by financing activities
    
    
    15,297
    
    
    
    20,716Net Increase in cash
    
    
    418
    
    
    
    58Cash at beginning of period
    
    
    1,269
    
    
    
    928Cash at end of period
    
    $
    1,687
    
    
    $
    986
 
 3




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 1   BASIS OF PREPARATION AND PRESENTATION
      4




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  5




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 2   ACQUISITIONS
 Acquisition of Certain Assets of Woodard LLC.
   6




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 Cash paid at closing
    
    $
    16,168GAAP value of 500,000 shares issued
    
    
    4,000
    (1)Value of 200,000 Warrants
    
    
    279

(2)Purchase price adjustment (Settled April, 2008)
    
    
    (1,272
    )Total consideration
    
    $
    19,175
 
 (1)
    
    The value of the 500,000 shares of common stock was based on the average closing
prices of Craftmades common stock, $0.01 par value per share, for the two days before,
the day of, and the two days after the date of the announcement of the merger or $8.00 per
share.(2)
    
    The 200,000 common stock warrants were valued using the Black-Scholes calculation at a
warrant price of $1.39 per share using the following assumptions: Expected volatility
    
    
    33
    %Risk-free interest rate
    
    
    3.81
    %Expected lives
    
    10 yearsDividend yield
    
    
    5.8
    %
   7




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##### Table of Contents



CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Purchase Price AllocationInitial estimated purchase price
    
    
    
    
    
    $
    20,168Less: Working capital adjustment
    
    
    
    
    
    
    (1,272
    )Value of warrants
    
    
    
    
    
    
    279Total Purchase Consideration
    
    
    
    
    
    
    19,175Acquired Assets (Adjusted to estimated fair value)Accounts receivable, net
    
    $
    12,708Inventories, net
    
    
    8,212Prepaid expenses and other current assets
    
    
    2,450Plant, property and equipment
    
    
    2,929Other assets
    
    
    1,528Total Assets
    
    
    
    
    
    
    27,827Assumed LiabilitiesAccounts payable
    
    $
    5,852Other accrued expenses
    
    
    1,702Other liabilities incurred during transactionProfessional fees associated with acquisition
    
    
    655Restructuring reserve
    
    
    692Deferred tax asset for restructuring reserve
    
    
    (249
    )Total Liabilities
    
    
    
    
    
    
    8,652Total Purchase Price
    
    
    
    
    
    $
    19,175
   8




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Unaudited Pro Forma Results
(In thousands, except per share data)
 Three Months Ended
    
    Nine Months EndedMarch 31,
    
    March 31,
    
    March 31,
    
    March 31,2009
    
    2008
    
    2009
    
    2008Net salesAs reported
    
    $
    52,000
    
    
    $
    54,918
    
    
    $
    119,427
    
    
    $
    98,468Pro forma
    
    
    52,000
    
    
    
    54,918
    
    
    
    119,427
    
    
    
    125,468Net income (loss)As reported
    
    $
    (135
    )
    
    $
    639
    
    
    $
    (809
    )
    
    $
    1,739Pro forma
    
    
    (135
    )
    
    
    639
    
    
    
    (809
    )
    
    
    487Basic earnings (loss) per shareAs reported
    
    $
    (0.02
    )
    
    $
    0.11
    
    
    $
    (0.14
    )
    
    $
    0.32Pro forma
    
    $
    (0.02
    )
    
    $
    0.11
    
    
    $
    (0.14
    )
    
    $
    0.09Diluted earnings (loss) per shareAs reported
    
    $
    (0.02
    )
    
    $
    0.11
    
    
    $
    (0.14
    )
    
    $
    0.32Pro forma
    
    $
    (0.02
    )
    
    $
    0.11
    
    
    $
    (0.14
    )
    
    $
    0.09Basic Shares Outstanding
    
    
    5,705
    
    
    
    5,694
    
    
    
    5,705
    
    
    
    5,366Proforma
    
    
    5,705
    
    
    
    5,694
    
    
    
    5,704
    
    
    
    5,704Diluted Shares Outstanding
    
    
    5,705
    
    
    
    5,700
    
    
    
    5,705
    
    
    
    5,373Proforma
    
    
    5,705
    
    
    
    5,700
    
    
    
    5,704
    
    
    
    5,704
  9




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Acquisition of Marketing Impressions, Inc.
   Purchase Price Summary
(Dollars in thousands)
 As of March 31, 2009:Amount paid at closing, net of cash acquired
    
    $
    1,287Contingent payments earned
    
    
    2,797Acquisition-related costs
    
    
    220Total consideration as of March 31, 2009
    
    $
    4,304Percent of
Adjusted Gross Profit 
July 1, 2006 to August 31, 2011
    
    
    22
    %Additonal
Percent of Adjusted Gross Profit 
July 1, 2006 to June 30, 2007 (not to exceed $750)
    
    
    15
    %
  10




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Summary of Acquired Intangibles
(Dollars in thousands)
 Life
    
    
    Grossin Years
    
    
    AmountPatents and trademarks
    
    
    15
    
    
    $
    710Non-compete covenants
    
    
    7
    
    
    
    820$
    1,530
  11




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 3   EARNINGS (LOSS) PER SHARE
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands, except per share data)Basic and diluted earnings (loss) per share:NumeratorNet income (loss)
    
    $
    (135
    )
    
    $
    639
    
    
    $
    (809
    )
    
    $
    1,739Denominator for basic earnings (loss) per shareWeighted average common shares outstanding
    
    
    5,705
    
    
    
    5,694
    
    
    
    5,705
    
    
    
    5,366Denominator for diluted earnings (loss) per shareWeighted average common shares outstanding
    
    
    5,705
    
    
    
    5,694
    
    
    
    5,705
    
    
    
    5,366Incremental shares for stock options/warrants
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    7Dilutive weighted average common shares
    
    
    5,705
    
    
    
    5,700
    
    
    
    5,705
    
    
    
    5,373Basic earnings (loss) per share
    
    $
    (0.02
    )
    
    $
    0.11
    
    
    $
    (0.14
    )
    
    $
    0.32Diluted earnings (loss) per share
    
    $
    (0.02
    )
    
    $
    0.11
    
    
    $
    (0.14
    )
    
    $
    0.32
  12




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 4   SEGMENT INFORMATION
     13




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Summary of Segment Information
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Net salesSpecialty
    
    $
    15,170
    
    
    $
    23,146
    
    
    $
    51,600
    
    
    $
    49,726Mass
    
    
    36,830
    
    
    
    31,772
    
    
    
    67,827
    
    
    
    48,742Total
    
    $
    52,000
    
    
    $
    54,918
    
    
    $
    119,427
    
    
    $
    98,468Gross profitSpecialty
    
    $
    4,166
    
    
    $
    6,328
    
    
    $
    15,784
    
    
    $
    15,823Mass
    
    
    4,427
    
    
    
    4,364
    
    
    
    8,985
    
    
    
    8,913Total
    
    $
    8,593
    
    
    $
    10,692
    
    
    $
    24,769
    
    
    $
    24,736Income (loss) from operationsSpecialty
    
    $
    (155
    )
    
    $
    486
    
    
    $
    672
    
    
    $
    2,388Mass
    
    
    568
    
    
    
    1,148
    
    
    
    (113
    )
    
    
    2,354Total
    
    $
    413
    
    
    $
    1,634
    
    
    $
    559
    
    
    $
    4,742
 14




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 5   STOCK-BASED COMPENSATION
   Stock-Based Compensation Expense
(Dollars in thousands)
 Three Months Ended
    
    Nine Months EndedMarch 31,
    
    March 31,
    
    March 31,
    
    March 31,2009
    
    2008
    
    2009
    
    2008Stock-based compensation expense recognized:Selling, general & administrative
    
    $
    30
    
    
    $
    30
    
    
    $
    90
    
    
    $
    86
  Future Stock-Based Compensation Expense
(Dollars in thousands)
 ExpectedFutureCompensationFiscal Year Ending
    
    CostJune 30, 2009 (remaining 3 months)
    
    $
    28June 30, 2010
    
    
    73June 30, 2011
    
    
    39June 30, 2012
    
    
    17$
    157
 15




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Summary of Stock Options
 Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Exercise
    
    
    AverageExercise
    
    
    Price
    
    
    RemainingShares
    
    
    Price
    
    
    Range
    
    
    Life (Years)Outstanding at June 30, 2008
    
    
    162,400
    
    
    
    13.63Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (2,200
    )
    
    
    18.85Outstanding at March 31, 2009
    
    
    160,200
    
    
    $
    13.56
    
    
    $
    6.75-$25.20
    
    
    
    7.8Exercisable at March 31, 2009
    
    
    48,600
    
    
    $
    17.74
    
    
    $
    6.75-$25.20
    
    
    
    6.3
  16




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 6   INCOME TAXES
  Summary of Effective Tax Rate
 Three Months Ended
    
    Nine Months EndedMarch 31,
    
    March 31,
    
    March 31,
    
    March 31,2009
    
    2008
    
    2009
    
    2008Effective tax rate
    
    
    (0.7
    %)
    
    
    34.9
    %
    
    
    27.5
    %
    
    
    34.8
    %
     17




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  Reconciliation of Unrecognized Tax Benefits (Dollars in thousands)
 Increases/(Decreases) in UnrecognizedTax Benefits As a Result ofTax Positions from
    
    
    
    
    
    Lapse inJuly 1,
    
    Prior
    
    Current
    
    
    
    
    
    Statute of
    
    March 31,2008
    
    Periods
    
    Period
    
    Settlements
    
    Limitations
    
    2009Unrecognized tax benefits
    
    $
    290
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    290
   Note 7    RELATED PARTY TRANSACTIONS
   18




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CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
    Note 8   COMMITMENTS AND CONTINGENCIES
   19




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##### Table of Contents



CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
  
 20




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Disclosure Regarding Forward-looking Statements
  Critical Accounting Policies and Estimates
    21




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22




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Results of Operations
   Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008
  Summary Income Statement by Segment
(Dollars in thousands)
 Three Months Ended
    
    
    Three Months EndedMarch 31, 2009
    
    
    March 31, 2008Specialty
    
    
    Mass
    
    
    Total
    
    
    Specialty
    
    
    Mass
    
    
    TotalNet sales
    
    $
    15,170
    
    
    $
    36,830
    
    
    $
    52,000
    
    
    $
    23,146
    
    
    $
    31,772
    
    
    $
    54,918Cost of goods sold
    
    
    (11,004
    )
    
    
    (32,403
    )
    
    
    (43,407
    )
    
    
    (16,818
    )
    
    
    (27,408
    )
    
    
    (44,226
    )Gross profit
    
    
    4,166
    
    
    
    4,427
    
    
    
    8,593
    
    
    
    6,328
    
    
    
    4,364
    
    
    
    10,692As a % of net sales
    
    
    27.5
    %
    
    
    12.0
    %
    
    
    16.5
    %
    
    
    27.3
    %
    
    
    13.7
    %
    
    
    19.5
    %Selling, general and administrative
    
    
    (4,092
    )
    
    
    (3,794
    )
    
    
    (7,886
    )
    
    
    (5,697
    )
    
    
    (3,151
    )
    
    
    (8,848
    )As a % of net sales
    
    
    27.0
    %
    
    
    10.3
    %
    
    
    15.2
    %
    
    
    24.6
    %
    
    
    9.9
    %
    
    
    16.1
    %Depreciation and amortization
    
    
    (229
    )
    
    
    (65
    )
    
    
    (294
    )
    
    
    (145
    )
    
    
    (65
    )
    
    
    (210
    )Total operating expenses
    
    
    (4,321
    )
    
    
    (3,859
    )
    
    
    (8,180
    )
    
    
    (5,842
    )
    
    
    (3,216
    )
    
    
    (9,058
    )Income (loss) from operations
    
    $
    (155
    )
    
    $
    568
    
    
    
    413
    
    
    $
    486
    
    
    $
    1,148
    
    
    
    1,634Interest expense, net
    
    
    
    
    
    
    
    
    
    
    (333
    )
    
    
    
    
    
    
    
    
    
    
    (524
    )Other income (expense)
    
    
    
    
    
    
    
    
    
    
    (125
    )
    
    
    
    
    
    
    
    
    
    
    139Income (loss) before income taxes
and minority interest
    
    
    
    
    
    
    
    
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    1,249Income taxes expense
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (343
    )Income (loss) before minority interest
    
    
    
    
    
    
    
    
    
    
    (46
    )
    
    
    
    
    
    
    
    
    
    
    906Minority interest
    
    
    
    
    
    
    
    
    
    
    (89
    )
    
    
    
    
    
    
    
    
    
    
    (267
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    $
    (135
    )
    
    
    
    
    
    
    
    
    
    $
    639
 Net Sales.
  23




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##### Table of Contents



Net Sales of the Speciality Segment
(Dollars in thousands)
 Fans
    
    
    WoodardLighting &
    
    
    Outdoor
    
    
    SegmentThree Months Ended
    
    Accessories
    
    
    Furniture
    
    
    TotalMarch 31, 2009
    
    $
    7,800
    
    
    $
    7,370
    
    
    $
    15,170March 31, 2008
    
    
    11,627
    
    
    
    11,519
    
    
    
    23,146Dollar increase (decrease)
    
    $
    (3,827
    )
    
    $
    (4,149
    )
    
    $
    (7,976
    )Percent increase (decrease)
    
    
    (33
    %)
    
    
    (36
    %)
    
    
    (34
    %)
   
 Net Sales of Mass Segment
(Dollars in thousands)
 Fans
    
    
    WoodardLighting &
    
    
    Outdoor
    
    
    SegmentThree Months Ended
    
    Accessories
    
    
    Furniture
    
    
    TotalMarch 31, 2009
    
    $
    5,062
    
    
    $
    31,768
    
    
    $
    36,830March 31, 2008
    
    
    7,445
    
    
    
    24,327
    
    
    
    31,772Dollar increase (decrease)
    
    $
    (2,383
    )
    
    $
    7,441
    
    
    $
    5,058Percent increase (decrease)
    
    
    (32
    %)
    
    
    31
    %
    
    
    16
    %
  24




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##### Table of Contents



Gross Profit.
  Gross Profit as a Percentage of Net Sales of Specialty Segment
 Fans
    
    
    WoodardLighting &
    
    
    Outdoor
    
    
    SegmentThree Months Ended
    
    Accessories
    
    
    Furniture
    
    
    TotalMarch 31, 2009
    
    
    33.8
    %
    
    
    20.7
    %
    
    
    27.5
    %March 31, 2008
    
    
    33.1
    %
    
    
    21.5
    %
    
    
    27.3
    %Percent increase (decrease)
    
    
    0.7
    %
    
    
    (0.8
    %)
    
    
    0.2
    %
   25




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Gross Profit as a Percentage of Net Sales of Mass
 Fans
    
    
    WoodardLighting &
    
    
    Outdoor
    
    
    SegmentThree Months Ended
    
    Accessories
    
    
    Furniture
    
    
    TotalMarch 31, 2009
    
    
    19.6
    %
    
    
    10.8
    %
    
    
    12.0
    %March 31, 2008
    
    
    24.7
    %
    
    
    10.4
    %
    
    
    13.7
    %Percent increase (decrease)
    
    
    (5.1
    %)
    
    
    0.4
    %
    
    
    (1.7
    %)
   Selling, General and Administrative Expenses.
 Total Company
Selling, General and Administrative Expenses
(Dollars in thousands)
 Increase/Three Months Ended
    
    
    (Decrease)March 31,
    
    
    March 31,
    
    
    Over Prior2009
    
    
    2008
    
    
    Year PeriodCommissions
    
    
    1,260
    
    
    
    1,872
    
    
    
    (612
    )Advertising
    
    $
    900
    
    
    $
    1,148
    
    
    $
    (248
    )Accounting, legal and consulting
    
    
    1,027
    
    
    
    1,100
    
    
    
    (73
    )Travel
    
    
    142
    
    
    
    208
    
    
    
    (66
    )Contract labor
    
    
    210
    
    
    
    265
    
    
    
    (55
    )Bad debt
    
    
    118
    
    
    
    66
    
    
    
    52Salaries and wages
    
    
    2,471
    
    
    
    2,394
    
    
    
    77Other
    
    
    1,758
    
    
    
    1,795
    
    
    
    (37
    )$
    7,886
    
    
    $
    8,848
    
    
    $
    (962
    )
  26




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Interest Expense.
 Minority Interest.
 Provision for Income Taxes.
 Nine Months Ended March 31, 2009 Compared to Nine Months Ended March 31, 2008
  27




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Summary Income Statement by Segment
(Dollars in thousands)
 Nine Months Ended
    
    
    Nine Months EndedMarch 31, 2009
    
    
    March 31, 2008Specialty
    
    
    Mass
    
    
    Total
    
    
    Specialty
    
    
    Mass
    
    
    TotalNet sales
    
    $
    51,600
    
    
    $
    67,827
    
    
    $
    119,427
    
    
    $
    49,726
    
    
    $
    48,742
    
    
    $
    98,468Cost of goods sold
    
    
    (35,816
    )
    
    
    (58,842
    )
    
    
    (94,658
    )
    
    
    (33,903
    )
    
    
    (39,829
    )
    
    
    (73,732
    )Gross profit
    
    
    15,784
    
    
    
    8,985
    
    
    
    24,769
    
    
    
    15,823
    
    
    
    8,913
    
    
    
    24,736As a % of net sales
    
    
    30.6
    %
    
    
    13.2
    %
    
    
    20.7
    %
    
    
    31.8
    %
    
    
    18.3
    %
    
    
    25.1
    %Selling, general and administrative
    
    
    (14,514
    )
    
    
    (8,902
    )
    
    
    (23,416
    )
    
    
    (13,003
    )
    
    
    (6,363
    )
    
    
    (19,366
    )As a % of net sales
    
    
    28.1
    %
    
    
    13.1
    %
    
    
    19.6
    %
    
    
    26.1
    %
    
    
    13.1
    %
    
    
    19.7
    %Depreciation and amortization
    
    
    (598
    )
    
    
    (196
    )
    
    
    (794
    )
    
    
    (432
    )
    
    
    (196
    )
    
    
    (628
    )Total operating expenses
    
    
    (15,112
    )
    
    
    (9,098
    )
    
    
    (24,210
    )
    
    
    (13,435
    )
    
    
    (6,559
    )
    
    
    (19,994
    )Income (loss) from operations
    
    $
    672
    
    
    $
    (113
    )
    
    
    559
    
    
    $
    2,388
    
    
    $
    2,354
    
    
    
    4,742Interest expense, net
    
    
    
    
    
    
    
    
    
    
    (1,108
    )
    
    
    
    
    
    
    
    
    
    
    (1,144
    )Other income (expense)
    
    
    
    
    
    
    
    
    
    
    (124
    )
    
    
    
    
    
    
    
    
    
    
    139Income (loss) before income taxes
and minority interest
    
    
    
    
    
    
    
    
    
    
    (673
    )
    
    
    
    
    
    
    
    
    
    
    3,737Income taxes (expense) / benefit
    
    
    
    
    
    
    
    
    
    
    307
    
    
    
    
    
    
    
    
    
    
    
    (929
    )Income (loss) before minority interest
    
    
    
    
    
    
    
    
    
    
    (366
    )
    
    
    
    
    
    
    
    
    
    
    2,808Minority interest
    
    
    
    
    
    
    
    
    
    
    (443
    )
    
    
    
    
    
    
    
    
    
    
    (1,069
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    $
    (809
    )
    
    
    
    
    
    
    
    
    
    $
    1,739
 Net Sales.
  28




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Net Sales of the Speciality Segment
(Dollars in thousands)
 Fans
    
    
    WoodardLighting &
    
    
    Outdoor
    
    
    SegmentNine Months Ended
    
    Accessories
    
    
    Furniture
    
    
    TotalMarch 31, 2009
    
    $
    29,295
    
    
    $
    22,305
    
    
    $
    51,600March 31, 2008
    
    
    38,207
    
    
    
    11,519
    
    
    
    49,726Dollar increase (decrease)
    
    $
    (8,912
    )
    
    $
    10,786
    
    
    $
    1,874Percent increase (decrease)
    
    
    (23
    %)
    
    
    94
    %
    
    
    4
    %
    
 Net Sales of Mass Segment
(Dollars in thousands)
 Fans
    
    
    WoodardLighting &
    
    
    Outdoor
    
    
    SegmentNine Months Ended
    
    Accessories
    
    
    Furniture
    
    
    TotalMarch 31, 2009
    
    $
    19,053
    
    
    $
    48,774
    
    
    $
    67,827March 31, 2008
    
    
    24,415
    
    
    
    24,327
    
    
    
    48,742Dollar increase (decrease)
    
    $
    (5,362
    )
    
    $
    24,447
    
    
    $
    19,085Percent increase (decrease)
    
    
    (22
    %)
    
    
    100
    %
    
    
    39
    %
  29




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##### Table of Contents



Gross Profit.
  Gross Profit as a Percentage of Net Sales of Specialty Segment
 Fans
    
    WoodardLighting &
    
    Outdoor
    
    SegmentNine Months Ended
    
    Accessories
    
    Furniture
    
    TotalMarch 31, 2009
    
    
    34.0
    %
    
    
    26.1
    %
    
    
    30.6
    %March 31, 2008
    
    
    34.9
    %
    
    
    21.5
    %
    
    
    31.8
    %Percent increase (decrease)
    
    
    (0.9
    %)
    
    
    4.5
    %
    
    
    (1.2
    %)
   30




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##### Table of Contents



Gross Profit as a Percentage of Net Sales of Mass
 Fans
    
    WoodardLighting &
    
    Outdoor
    
    SegmentNine Months Ended
    
    Accessories
    
    Furniture
    
    TotalMarch 31, 2009
    
    
    21.8
    %
    
    
    9.9
    %
    
    
    13.2
    %March 31, 2008
    
    
    26.2
    %
    
    
    10.4
    %
    
    
    18.3
    %Percent decrease
    
    
    (4.4
    %)
    
    
    (0.5
    %)
    
    
    (5.0
    %)
   Selling, General and Administrative Expenses.
 Selling, General and Administrative Expenses
(Dollars in thousands)
 Increase/Nine Months Ended
    
    
    (Decrease)March 31,
    
    
    March 31,
    
    
    Over Prior2009
    
    
    2008
    
    
    Year PeriodHistorical Craftmade
    
    $
    15,299
    
    
    $
    15,829
    
    
    $
    (530
    )Woodard Incremental
    
    
    8,117
    
    
    
    3,537
    
    
    
    4,580$
    23,416
    
    
    $
    19,366
    
    
    $
    4,050
  31




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##### Table of Contents



Historical Craftmade
Selling, General and Administrative Expenses
(Dollars in thousands)
 Increase/Nine Months Ended
    
    
    (Decrease)March 31,
    
    
    March 31,
    
    
    Over Prior2009
    
    
    2008
    
    
    Year PeriodCommissions
    
    
    1,715
    
    
    
    2,024
    
    
    
    (309
    )Advertising
    
    $
    1,257
    
    
    $
    1,501
    
    
    $
    (244
    )Group insurance
    
    
    669
    
    
    
    832
    
    
    
    (163
    )Accounting, legal and consulting
    
    
    1,771
    
    
    
    1,900
    
    
    
    (129
    )Salaries and wages
    
    
    5,599
    
    
    
    5,440
    
    
    
    159Bank charges
    
    
    220
    
    
    
    145
    
    
    
    75Bad debt
    
    
    208
    
    
    
    122
    
    
    
    86Other
    
    
    3,860
    
    
    
    3,865
    
    
    
    (5
    )$
    15,299
    
    
    $
    15,829
    
    
    $
    (530
    )
  Interest Expense.
 Minority Interest.
 Provision for Income Taxes.
 32




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##### Table of Contents



Liquidity and Capital Resources
       Recent Accounting Pronouncements
  33




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##### Table of Contents



Long-Term Obligations
  34




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##### Table of Contents



Summary of Long Term Obligations
 (Dollars in thousands)
 OutstandingBalance
    
    
    CurrentCommitment
    
    
    Mar 31, 2009
    
    
    Interest Rate
    
    
    MaturityNote payable  facility
    
    
    n/a
    
    
    
    10,435
    
    
    
    6.5
    %
    
    December 10, 2017Capital lease obligation
    
    
    n/a
    
    
    
    80
    
    
    
    
    
    
    November 5, 2010Sub-total
    
    
    
    
    
    
    10,515Less: current amounts due
    
    
    
    
    
    
    532Long-term obligations
    
    
    
    
    
    $
    9,983
     35




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Changes in Internal Controls
  36




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##### Table of Contents



PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity 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
  37




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Description2.1
    
    Asset Purchase Agreement dated as of December 18, 2007, by and among
Woodard, LLC, Henry Crown and Company d/b/a CC Industries, Inc. and Craftmade
International, Inc., previously filed as Exhibit 2.1 to the Companys Form 8-K on
January 4, 2008, and incorporated by reference herein.Pursuant to Item 601(b)(2) of Regulation S-K, the Company has not filed
herewith the schedules and exhibits to the foregoing exhibit and agrees to
furnish supplementally to the Securities and Exchange Commission, upon request,
any omitted schedules or similar attachments to the foregoing exhibit.2.2
    
    Stock Purchase Agreement between Craftmade International, Inc., Trade
Source International, Inc., and Robert W. Lackey, dated September 15, 2006,
previously filed as Exhibit 10.1 to the Companys Form 8-K on September 18, 2006,
and incorporated by reference herein.Pursuant to Item 601(b)(2) of Regulation S-K, the Company has not filed
herewith the schedules and exhibits to the foregoing exhibit and agrees to
furnish supplementally to the Securities and Exchange Commission, upon request,
any omitted schedules or similar attachments to the foregoing exhibit.2.3
    
    Agreement for the Purchase and Sale of Personal Goodwill between Trade
Source International, Inc. and Robert Lackey, dated September 15, 2006, previously
filed as Exhibit 10.2 to the Companys Form 8-K on September 18, 2006, and
incorporated by reference herein.2.4
    
    Agreement for the Purchase and Sale of Personal Goodwill between Trade
Source International, Inc. and Robert Lackey, Jr., dated September 15, 2006,
previously filed as Exhibit 10.3 to the Companys Form 8-K on September 18, 2006,
and incorporated by reference herein.2.5
    
    Intellectual Property Assignment by and between Trade Source
International, Inc., Robert W. Lackey, Robert W. Lackey, Jr., RWL Incorporated
f/k/a Robert W. Lackey Corporation and R.L. Products Corporation, dated September
15, 2006, previously filed as Exhibit 10.4 to the Company Form 8-K on September
18, 2006, and incorporated by reference herein.2.6
    
    Non-Competition Agreement between Trade Source International, Inc. and
Robert W. Lackey, dated September 15, 2006, previously filed as Exhibit 10.5 to the
Companys Form 8-K on September 18, 2006, and incorporated by reference herein.2.7
    
    Non-Competition Agreement between Trade Source International and Robert
W. Lackey, Jr., dated September 15, 2006, previously filed as Exhibit 10.6 to the
Companys Form 8-K on September 18, 2006, and incorporated by reference herein.2.8
    
    Consulting Agreement by and between Craftmade International, Inc.,
Trade Source International, Inc. and Imagine One Resources, LLC, dated September
15, 2006, previously filed as Exhibit 10.7 to the Companys Form 8-K on September
18, 2006,
 38




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##### Table of Contents



ExhibitNumber
    
    Descriptionand incorporated by reference herein.2.9
    
    Partially Subordinate Security Agreement among Trade Source
International, Inc., Marketing Impressions, Inc., Prime Home Impressions, LLC, and
Robert Lackey, (Lackey), as collateral agent for Lackey, Robert W. Lackey, Jr.,
Imagine One
Resources, LLC, RWL Corporation and R.L. Products Corporation, dated September
15, 2006, previously filed as Exhibit 10.8 to the Companys Form 8-K on
September 18, 2006, and incorporated by reference herein.2.10
    
    Subordination Agreement by and among Robert W. Lackey (Lackey), as
collateral agent for Lackey, Robert W. Lackey, Jr., Imagine One Resources, LLC, RWL
Corporation, R.L. Products Corporation, and The Frost National Bank, Trade Source
International, Inc., Marketing Impressions, Inc., Prime/Home Impressions, LLC and
Craftmade International, Inc., dated September 15, 2006, previously filed as
Exhibit 10.9 to the Companys Form 8-K on September 18, 2006, and incorporated by
reference herein.2.11
    
    Agreement and Plan of Merger by and among Craftmade International,
Inc., Bill Teiber Co., Inc., Teiber Lighting Products, Inc., Todd Teiber and Edward
Oberstein dated March 1, 2005, previously filed as Exhibit 10.1 to the Companys
Form 8-K on March 7, 2005, and incorporated by reference herein.2.12
    
    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
Form 8-K filed on July 15, 1998, and incorporated by reference herein.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-8 (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 Exhibit 4 to the Companys Form 8-K on July 9, 1999, and incorporated by
reference herein.4.3
    
    Warrant Certificate dated January 2, 2008, issued by Craftmade
International, Inc. to Woodard, LLC.
 39




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##### Table of Contents



ExhibitNumber
    
    Description10.1
    
    Promissory Note dated November 14, 2007, in the original principal
amount of $11,000,000 payable to the order of Allianz Life Insurance Company of
North America and executed by CM Real Estate, LLC., previously filed as Exhibit
10.1 to the Companys Form 8-K on November 20, 2007 (File No. 000-26667), and
incorporated by reference herein.10.2
    
    Deed of Trust, Mortgage and Security Agreement by CM Real Estate, LLC,
effective November 14, 2007, previously filed as Exhibit 10.2 to the Companys Form
8-K on November 20, 2007 (File No. 000-26667), and incorporated by reference
herein.10.3
    
    Guaranty Agreement dated November 14, 2007, by Craftmade International,
Inc. in favor of Allianz Life Insurance Company of North America, previously filed
as Exhibit 10.3 to the Companys Form 8-K on November 20, 2007 (File No.
000-26667), and incorporated by reference herein.10.4
    
    Lease Agreement dated as of November 14, 2007, between CM Real Estate,
LLC and Craftmade International, Inc., previously filed as Exhibit 10.4 to the
Companys Form 8-K on November 20, 2007 (File No. 000-26667), and incorporated by
reference herein.10.5
    
    Third Amended and Restated Loan Agreement Among Craftmade
International, Inc., the Frost National Bank, As Administrative Agent, and the
Other Lenders Party Hereto, dated December 31, 2007, previously filed as Exhibit
10.1 to the Companys Form 8-K on January 7, 2008 (File No. 000-26667), and
incorporated by reference herein.10.6
    
    First Amendment to Credit Agreement, effective September 30, 2008,
Among Craftmade International, Inc., the Frost National Bank, As Administrative
Agent, and the Other Lenders Party Thereto, dated November 10, 2008, previously
filed as Exhibit 10.6 to the Companys Form 10-Q on November 14, 2008 (File No.
000-26667), and incorporated by reference herein.10.7
    
    Waiver to Third Amended and Restated Loan Agreement, dated February 13,
2009, Among Craftmade International, Inc., the Frost National Bank, As
Administrative Agent, and the Other Lenders Party Thereto, previously filed as
Exhibit 10.7 to the Companys Form 10-Q on February 17, 2009, and incorporated by
reference herein.10.8
    
    Revolving Promissory Note Between Craftmade International, Inc., and
The Frost National Bank, dated December 31, 2007, previously filed as Exhibit 10.2
to the Companys Form 8-K on January 7, 2008, and incorporated by reference herein.10.9
    
    Revolving Promissory Note Between Craftmade International, Inc., and
Whitney National Bank, dated December 31, 2007, previously filed as Exhibit 10.3 to
the Companys Form 8-K on January 7, 2008, and incorporated by reference herein.10.10
    
    Revolving Promissory Note Between Craftmade International, Inc., and
Commerce Bank, N.A., dated December 31, 2007, previously filed as Exhibit 10.4 to
the Companys Form 8-K on January 7, 2008, and incorporated by reference herein.10.11
    
    Craftmade International, Inc. 2006 Long-Term Incentive Plan,
previously filed as Exhibit 10.1 to the Companys Form 8-K on December 4, 2006, and
incorporated by reference herein.
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##### Table of Contents



ExhibitNumber
    
    Description10.12
    
    Incentive Stock Option Agreement, previously filed as Exhibit 10.2 to
the Companys Form 8-K on December 4, 2006, and incorporated by reference herein.10.13
    
    Non-qualified Stock Option Agreement, previously filed as Exhibit 10.3
to the Companys Form 8-K on December 4, 2006, and incorporated by reference
herein.10.14
    
    Stock Appreciation Rights Agreement, previously filed as Exhibit 10.4
to the Companys Form 8-K on December 4, 2006, and incorporated by reference
herein.10.15
    
    Restricted Stock Award Agreement, previously filed as Exhibit 10.5 to
the Companys Form 8-K on December 4, 2006, and incorporated by reference herein.10.16
    
    Employment Agreement dated as of July 1, 2008, between Craftmade
International, Inc. and James R. Ridings, previously filed as Exhibit 99.1 to the
Companys Form 8-K filed
on July 8, 2008, and incorporated herein by reference.31.1*
    
    Certification of J. Marcus Scrudder, Chief Executive Officer of the
Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of C. Brett Burford, Chief Financial Officer of the
Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification of J. Marcus Scrudder, Chief Executive Officer of the
Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification of C. Brett Burford, Chief Financial Officer of the
Company, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Each document marked with an asterisk is filed or furnished
herewith. 
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##### Table of Contents



SIGNATURES
  CRAFTMADE INTERNATIONAL, INC.
(Registrant)Date:  May 14, 2009
    /s/  J. Marcus ScrudderJ. MARCUS SCRUDDERChief Executive OfficerDate:  May 14, 2009
    /s/ C. Brett BurfordC. BRETT BURFORDChief Financial Officer 42