##### 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, 2006 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to
 Commission file number  000-26667
 CRAFTMADE INTERNATIONAL, INC.
  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)
  þ o
  o þ o
 o þ




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##### 



Part I.  Financial InformationItem 1. Financial StatementsCondensed Consolidated Statements of Income (Unaudited) for the Three and Nine
Months Ended March 31, 2006 and 2005Condensed Consolidated Balance Sheets at March 31, 2006 (Unaudited) and June 30, 2005Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months
Ended March 31, 2006 and 2005Notes to Condensed Consolidated Financial StatementsItem 2.  Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3.  Quantitative and Qualitative Disclosures About Market RiskItem 4.  Controls and ProceduresPart II.  Other InformationItem 1.  Legal ProceedingsItem 1A.  Risk FactorsItem 2.  Unregistered Sales of Equity Securities and Use of ProceedsItem 3.  Defaults Upon Senior SecuritiesItem 4.  Submission of Matters to a Vote of Security HoldersItem 5.  Other InformationItem 6.  ExhibitsCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




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##### Table of Contents



PART I
FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements.
  
  
 FOR THE THREE MONTHS ENDED
    
    
    FOR THE NINE MONTHS ENDEDMarch 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Net sales
    
    $
    27,002
    
    
    $
    27,059
    
    
    $
    85,889
    
    
    $
    84,433Cost of goods sold
    
    
    (18,434
    )
    
    
    (19,166
    )
    
    
    (59,987
    )
    
    
    (59,208
    )Gross profit
    
    
    8,568
    
    
    
    7,893
    
    
    
    25,902
    
    
    
    25,225Gross profit as a percentage of net sales
    
    
    31.7
    %
    
    
    29.2
    %
    
    
    30.2
    %
    
    
    29.9
    %Selling, general and administrative expenses
    
    
    (5,060
    )
    
    
    (4,902
    )
    
    
    (14,692
    )
    
    
    (14,807
    )Depreciation and amortization
    
    
    (137
    )
    
    
    (148
    )
    
    
    (448
    )
    
    
    (436
    )Total operating expenses
    
    
    (5,197
    )
    
    
    (5,050
    )
    
    
    (15,140
    )
    
    
    (15,243
    )Income from operations
    
    
    3,371
    
    
    
    2,843
    
    
    
    10,762
    
    
    
    9,982Interest expense, net
    
    
    (290
    )
    
    
    (263
    )
    
    
    (916
    )
    
    
    (733
    )Other expenses
    
    
    (36
    )
    
    
    
    
    
    
    (50
    )
    
    
    Minority interests
    
    
    (724
    )
    
    
    (859
    )
    
    
    (2,196
    )
    
    
    (2,420
    )Income before income taxes
    
    
    2,321
    
    
    
    1,721
    
    
    
    7,600
    
    
    
    6,829Provision for income taxes
    
    
    (573
    )
    
    
    (628
    )
    
    
    (2,423
    )
    
    
    (2,466
    )Net income
    
    $
    1,748
    
    
    $
    1,093
    
    
    $
    5,177
    
    
    $
    4,363Basic earnings per common share
    
    $
    0.34
    
    
    $
    0.22
    
    
    $
    1.00
    
    
    $
    0.86Diluted earnings per common share
    
    $
    0.34
    
    
    $
    0.22
    
    
    $
    0.99
    
    
    $
    0.86Cash dividends declared per common share
    
    $
    0.12
    
    
    $
    0.10
    
    
    $
    0.36
    
    
    $
    0.30
 
 3




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##### Table of Contents



March 31,
    
    
    June 30,2006
    
    
    2005(Unaudited)Current assetsCash
    
    $
    691
    
    
    $
    9,145Accounts receivable  net of allowance
of $232 and $300, respectively
    
    
    17,090
    
    
    
    21,810Inventories  net of allowance of $990
and $717, respectively
    
    
    18,332
    
    
    
    18,042Deferred income taxes
    
    
    1,392
    
    
    
    1,224Prepaid expenses and other current assets
    
    
    1,568
    
    
    
    374Total current assets
    
    
    39,073
    
    
    
    50,595Property and equipmentLand
    
    
    1,535
    
    
    
    1,535Building
    
    
    7,796
    
    
    
    7,796Office furniture and equipment
    
    
    3,293
    
    
    
    9,148Leasehold improvements
    
    
    187
    
    
    
    27912,811
    
    
    
    18,758Less: accumulated depreciation
    
    
    (4,617
    )
    
    
    (10,266
    )Total property and equipment, net
    
    
    8,194
    
    
    
    8,492Other assetsGoodwill
    
    
    11,480
    
    
    
    11,480Other intangibles  net of accumulated amortization
of $33 and $10, respectively
    
    
    177
    
    
    
    190Other assets
    
    
    29
    
    
    
    58Total other assets
    
    
    11,686
    
    
    
    11,728Total assets
    
    $
    58,953
    
    
    $
    70,815
 
 4




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##### Table of Contents



March 31,
    
    
    June 30,2006
    
    
    2005(Unaudited)Current liabilitiesNote payable  current
    
    $
    1,112
    
    
    $
    1,319Revolving line of credit
    
    
    548
    
    
    
    24,548Accounts payable
    
    
    7,971
    
    
    
    9,299Commissions payable
    
    
    242
    
    
    
    248Income taxes payable/(receivable)
    
    
    282
    
    
    
    (33
    )Accrued customer allowances
    
    
    3,443
    
    
    
    4,164Other accrued expenses
    
    
    1,076
    
    
    
    1,055Total current liabilities
    
    
    14,674
    
    
    
    40,600Other non-current liabilitiesNote payable  long term
    
    
    515
    
    
    
    1,551Revolving line of credit
    
    
    13,297
    
    
    
    Other long-term expenses
    
    
    860
    
    
    
    860Deferred income taxes
    
    
    146
    
    
    
    226Total other non-current liabilities
    
    
    14,818
    
    
    
    2,637Total liabilities
    
    
    29,492
    
    
    
    43,237Minority interests
    
    
    1,740
    
    
    
    3,205Commitments and contingenciesStockholders equitySeries A cumulative, convertible callable
preferred stock, $1.00 par value, 2,000,000
shares authorized; 32,000 shares issued
    
    
    32
    
    
    
    32Common stock, $0.01 par value, 15,000,000
shares authorized and 9,702,420 and
9,699,920 shares issued, respectively
    
    
    97
    
    
    
    97Additional paid-in capital
    
    
    18,696
    
    
    
    18,653Retained earnings
    
    
    48,903
    
    
    
    45,598Less: treasury stock, 4,499,920 common shares
at cost, and 32,000 preferred shares at cost
    
    
    (40,007
    )
    
    
    (40,007
    )Total stockholders equity
    
    
    27,721
    
    
    
    24,373Total liabilities and stockholders equity
    
    $
    58,953
    
    
    $
    70,815
 
 5




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##### Table of Contents



FOR THE NINE MONTHS ENDEDMarch 31,
    
    
    March 31,2006
    
    
    2005Net cash provided by operating activities
    
    $
    8,248
    
    
    $
    7,383Cash flows from investing activitiesAdditions to property and equipment
    
    
    (163
    )
    
    
    (57
    )Acquisition of Bill Teiber Co., Inc., net of cash acquired
    
    
    
    
    
    
    (4,000
    )Additions to other intangibles
    
    
    
    
    
    
    (10
    )Cash used in investing activities
    
    
    (163
    )
    
    
    (4,067
    )Cash flows from financing activitiesNet proceeds from/(payments on) lines of credit
    
    
    (10,703
    )
    
    
    4,519Principal payments on notes payable
    
    
    (1,243
    )
    
    
    (2,191
    )Treasury stock repurchases
    
    
    
    
    
    
    (2,925
    )Stock options exercised
    
    
    17
    
    
    
    306Cash dividends
    
    
    (1,780
    )
    
    
    (1,538
    )Distributions to minority interest members
    
    
    (2,830
    )
    
    
    (1,395
    )Net cash used in financing activities
    
    
    (16,539
    )
    
    
    (3,224
    )Net increase/(decrease) in cash
    
    
    (8,454
    )
    
    
    92Cash at beginning of period
    
    
    9,145
    
    
    
    5,838Cash at end of period
    
    $
    691
    
    
    $
    5,930
 
 6




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7




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FOR THE THREE MONTHS ENDED
    
    
    FOR THE NINE MONTHS ENDEDMarch 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands, except per share data)Basic and diluted earnings per share:NumeratorNet income
    
    $
    1,748
    
    
    $
    1,093
    
    
    $
    5,177
    
    
    $
    4,363Denominator for basic EPSWeighted average common shares outstanding
    
    
    5,201
    
    
    
    5,062
    
    
    
    5,201
    
    
    
    5,060Denominator for diluted EPSWeighted average common shares outstanding
    
    
    5,201
    
    
    
    5,062
    
    
    
    5,201
    
    
    
    5,060Incremental shares for stock options
    
    
    10
    
    
    
    12
    
    
    
    9
    
    
    
    25Potentially dilutive weighted average common shares
    
    
    5,211
    
    
    
    5,074
    
    
    
    5,210
    
    
    
    5,085Basic earnings per share
    
    $
    0.34
    
    
    $
    0.22
    
    
    $
    1.00
    
    
    $
    0.86Diluted earnings per share
    
    $
    0.34
    
    
    $
    0.22
    
    
    $
    0.99
    
    
    $
    0.86
 8




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##### Table of Contents



Share-Based Payment
   FOR THE THREE MONTHS ENDED
    
    
    FOR THE NINE MONTHS ENDEDMarch 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands, except per share data)Actual
    
    
    Pro Forma
    
    
    Actual
    
    
    Pro FormaNet income, as reported
    
    $
    1,748
    
    
    $
    1,093
    
    
    $
    5,177
    
    
    $
    4,363Compensation expense, net of related taxes
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (46
    )Net income, proforma
    
    $
    1,748
    
    
    $
    1,088
    
    
    $
    5,177
    
    
    $
    4,317Basic earnings per share, as reported
    
    $
    0.34
    
    
    $
    0.22
    
    
    $
    1.00
    
    
    $
    0.86Basic earnings per share, proforma
    
    
    0.34
    
    
    
    0.21
    
    
    
    1.00
    
    
    
    0.85Diluted earnings per share, as reported
    
    $
    0.34
    
    
    $
    0.22
    
    
    $
    0.99
    
    
    $
    0.86Diluted earnings per share, proforma
    
    
    0.34
    
    
    
    0.21
    
    
    
    0.99
    
    
    
    0.85
 9




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##### Table of Contents



FOR THE THREE MONTHS ENDED
    
    
    FOR THE NINE MONTHS ENDEDMarch 31,
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,2006
    
    
    2005
    
    
    2006
    
    
    2005(In thousands)Net salesCraftmade
    
    $
    14,704
    
    
    $
    12,707
    
    
    $
    46,360
    
    
    $
    39,576TSI
    
    
    12,298
    
    
    
    14,352
    
    
    
    39,529
    
    
    
    44,857Total
    
    $
    27,002
    
    
    $
    27,059
    
    
    $
    85,889
    
    
    $
    84,433Income from operationsCraftmade
    
    $
    1,950
    
    
    $
    1,369
    
    
    $
    6,495
    
    
    $
    4,884TSI
    
    
    1,421
    
    
    
    1,474
    
    
    
    4,267
    
    
    
    5,098Total
    
    $
    3,371
    
    
    $
    2,843
    
    
    $
    10,762
    
    
    $
    9,982Net incomeCraftmade
    
    $
    1,111
    
    
    $
    742
    
    
    $
    3,653
    
    
    $
    2,736TSI
    
    
    637
    
    
    
    351
    
    
    
    1,524
    
    
    
    1,627Total
    
    $
    1,748
    
    
    $
    1,093
    
    
    $
    5,177
    
    
    $
    4,363
 10




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##### Table of Contents



March 31,
    
    
    June 30,2006
    
    
    2005
    
    
    ChangeTotal AssetsCraftmade
    
    $
    50,278
    
    
    $
    50,835
    
    
    $
    (557
    )TSI
    
    
    8,675
    
    
    
    19,980
    
    
    
    (11,305
    )Total
    
    $
    58,953
    
    
    $
    70,815
    
    
    $
    (11,862
    )
 Item 2: Liquidity and Capital Resources
   11




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##### Table of Contents



Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
      Share-Based Payment
 12




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##### Table of Contents



Three Months Ended
    
    
    Three Months EndedMarch 31, 2006
    
    
    March 31, 2005Craftmade
    
    
    TSI
    
    
    Total
    
    
    Craftmade
    
    
    TSI
    
    
    TotalNet sales
    
    $
    14,704
    
    
    $
    12,298
    
    
    $
    27,002
    
    
    $
    12,707
    
    
    $
    14,352
    
    
    $
    27,059Cost of goods sold
    
    
    (9,197
    )
    
    
    (9,237
    )
    
    
    (18,434
    )
    
    
    (8,198
    )
    
    
    (10,968
    )
    
    
    (19,166
    )Gross profit
    
    
    5,507
    
    
    
    3,061
    
    
    
    8,568
    
    
    
    4,509
    
    
    
    3,384
    
    
    
    7,893Gross profit as a % of net sales
    
    
    37.5
    %
    
    
    24.9
    %
    
    
    31.7
    %
    
    
    35.5
    %
    
    
    23.6
    %
    
    
    29.2
    %Selling, general and administrative
    
    
    (3,416
    )
    
    
    (1,644
    )
    
    
    (5,060
    )
    
    
    (3,002
    )
    
    
    (1,900
    )
    
    
    (4,902
    )As a % of net sales
    
    
    23.2
    %
    
    
    13.4
    %
    
    
    18.7
    %
    
    
    23.6
    %
    
    
    13.2
    %
    
    
    18.1
    %Depreciation and amortization
    
    
    (141
    )
    
    
    4
    
    
    
    (137
    )
    
    
    (138
    )
    
    
    (10
    )
    
    
    (148
    )Total operating expenses
    
    
    (3,557
    )
    
    
    (1,640
    )
    
    
    (5,197
    )
    
    
    (3,140
    )
    
    
    (1,910
    )
    
    
    (5,050
    )Income from operations
    
    
    1,950
    
    
    
    1,421
    
    
    
    3,371
    
    
    
    1,369
    
    
    
    1,474
    
    
    
    2,843Interest expense, net
    
    
    (266
    )
    
    
    (24
    )
    
    
    (290
    )
    
    
    (239
    )
    
    
    (24
    )
    
    
    (263
    )Other expenses
    
    
    (36
    )
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    Minority interests
    
    
    
    
    
    
    (724
    )
    
    
    (724
    )
    
    
    
    
    
    
    (859
    )
    
    
    (859
    )Income before income taxes
    
    
    1,648
    
    
    
    673
    
    
    
    2,321
    
    
    
    1,130
    
    
    
    591
    
    
    
    1,721Provision for income taxes
    
    
    (537
    )
    
    
    (36
    )
    
    
    (573
    )
    
    
    (388
    )
    
    
    (240
    )
    
    
    (628
    )Net income
    
    $
    1,111
    
    
    $
    637
    
    
    $
    1,748
    
    
    $
    742
    
    
    $
    351
    
    
    $
    1,093
  Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
 Net Sales.
    13




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Net Sales of TSI Segment
 Prime/
    
    
    
    
    
    
    TSITrade
    
    
    Home
    
    
    Design
    
    
    SegmentQuarter Ended
    
    Source
    
    
    Impressions
    
    
    Trends
    
    
    TotalMarch 31, 2006
    
    $
    5,244
    
    
    $
    2,888
    
    
    $
    4,166
    
    
    $
    12,298March 31, 2005
    
    
    4,235
    
    
    
    2,600
    
    
    
    7,517
    
    
    
    14,352Dollar increase/(decrease)
    
    
    1,009
    
    
    
    288
    
    
    
    (3,351
    )
    
    
    (2,054
    )Percent increase/(decrease)
    
    
    23.8
    %
    
    
    11.1
    %
    
    
    (44.6
    %)
    
    
    (14.3
    %)
     Gross Profit.
  14




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Gross Profit of TSI Segment
 Prime/
    
    
    
    
    
    
    TSITrade
    
    
    Home
    
    
    Design
    
    
    SegmentQuarter Ended
    
    Source
    
    
    Impressions
    
    
    Trends
    
    
    TotalMarch 31, 2006
    
    
    20.0
    %
    
    
    37.3
    %
    
    
    22.4
    %
    
    
    24.9
    %March 31, 2005
    
    
    14.1
    %
    
    
    35.5
    %
    
    
    24.8
    %
    
    
    23.6
    %Percent increase/(decrease)
    
    
    5.9
    %
    
    
    1.8
    %
    
    
    (2.4
    %)
    
    
    1.3
    %
   Selling, General and Administrative Expenses.
 SG&A
 Increase/(Decrease)Quarter Ended
    
    
    OverMarch 31,
    
    
    March 31,
    
    
    Prior Year2006
    
    
    2005
    
    
    PeriodSalaries and wages
    
    $
    1,817
    
    
    $
    1,438
    
    
    $
    379Accounting, legal and consulting
    
    
    461
    
    
    
    994
    
    
    
    (533
    )Other
    
    
    2,782
    
    
    
    2,470
    
    
    
    312$
    5,060
    
    
    $
    4,902
    
    
    $
    158
  15




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Interest Expense.
 Minority Interests.
 Provision for Income Taxes.
 16




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##### Table of Contents



Nine Months Ended March 31, 2006 Compared to the Nine Months Ended March 31, 2005
  Nine Months Ended
    
    
    Nine Months EndedMarch 31, 2006
    
    
    March 31, 2005Craftmade
    
    
    TSI
    
    
    Total
    
    
    Craftmade
    
    
    TSI
    
    
    TotalNet sales
    
    $
    46,360
    
    
    $
    39,529
    
    
    $
    85,889
    
    
    $
    39,576
    
    
    $
    44,857
    
    
    $
    84,433Cost of goods sold
    
    
    (29,612
    )
    
    
    (30,375
    )
    
    
    (59,987
    )
    
    
    (24,831
    )
    
    
    (34,377
    )
    
    
    (59,208
    )Gross profit
    
    
    16,748
    
    
    
    9,154
    
    
    
    25,902
    
    
    
    14,745
    
    
    
    10,480
    
    
    
    25,225Gross profit as a % of net sales
    
    
    36.1
    %
    
    
    23.2
    %
    
    
    30.2
    %
    
    
    37.3
    %
    
    
    23.4
    %
    
    
    29.9
    %Selling, general and administrative
    
    
    (9,819
    )
    
    
    (4,873
    )
    
    
    (14,692
    )
    
    
    (9,461
    )
    
    
    (5,346
    )
    
    
    (14,807
    )As a % of net sales
    
    
    21.2
    %
    
    
    12.3
    %
    
    
    17.1
    %
    
    
    23.9
    %
    
    
    11.9
    %
    
    
    17.5
    %Depreciation and amortization
    
    
    (434
    )
    
    
    (14
    )
    
    
    (448
    )
    
    
    (400
    )
    
    
    (36
    )
    
    
    (436
    )Total operating expenses
    
    
    (10,253
    )
    
    
    (4,887
    )
    
    
    (15,140
    )
    
    
    (9,861
    )
    
    
    (5,382
    )
    
    
    (15,243
    )Income from operations
    
    
    6,495
    
    
    
    4,267
    
    
    
    10,762
    
    
    
    4,884
    
    
    
    5,098
    
    
    
    9,982Interest expense, net
    
    
    (846
    )
    
    
    (70
    )
    
    
    (916
    )
    
    
    (647
    )
    
    
    (86
    )
    
    
    (733
    )Other expenses
    
    
    (36
    )
    
    
    (14
    )
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    Minority interests
    
    
    
    
    
    
    (2,196
    )
    
    
    (2,196
    )
    
    
    
    
    
    
    (2,420
    )
    
    
    (2,420
    )Income before income taxes
    
    
    5,613
    
    
    
    1,987
    
    
    
    7,600
    
    
    
    4,237
    
    
    
    2,592
    
    
    
    6,829Provision for income taxes
    
    
    (1,960
    )
    
    
    (463
    )
    
    
    (2,423
    )
    
    
    (1,501
    )
    
    
    (965
    )
    
    
    (2,466
    )Net income
    
    $
    3,653
    
    
    $
    1,524
    
    
    $
    5,177
    
    
    $
    2,736
    
    
    $
    1,627
    
    
    $
    4,363
 Net Sales.
  
 
 17




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##### Table of Contents



Net Sales of TSI Segment
 Prime/
    
    
    
    
    
    
    TSITrade
    
    
    Home
    
    
    Design
    
    
    SegmentNine Months Ended
    
    Source
    
    
    Impressions
    
    
    Trends
    
    
    TotalMarch 31, 2006
    
    $
    15,250
    
    
    $
    9,556
    
    
    $
    14,723
    
    
    $
    39,529March 31, 2005
    
    
    16,301
    
    
    
    7,308
    
    
    
    21,248
    
    
    
    44,857Dollar increase/(decrease)
    
    
    (1,051
    )
    
    
    2,248
    
    
    
    (6,525
    )
    
    
    (5,328
    )Percent increase/(decrease)
    
    
    (6.4
    %)
    
    
    30.8
    %
    
    
    (30.7
    %)
    
    
    (11.9
    %)
     Gross Profit.
  18




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##### Table of Contents



Gross Profit of TSI Segment
 Prime/
    
    
    
    
    
    TSITrade
    
    Home
    
    Design
    
    SegmentNine Months Ended
    
    Source
    
    Impressions
    
    Trends
    
    TotalMarch 31, 2006
    
    
    15.1
    %
    
    
    34.5
    %
    
    
    24.1
    %
    
    
    23.2
    %March 31, 2005
    
    
    16.6
    %
    
    
    34.3
    %
    
    
    24.8
    %
    
    
    23.4
    %Percent increase/(decrease)
    
    
    (1.5
    %)
    
    
    0.2
    %
    
    
    (0.7
    %)
    
    
    (0.2
    %)
   Selling, General and Administrative Expenses.
 SG&A
 Increase/(Decrease)Nine Months Ended
    
    
    OverMarch 31,
    
    
    Prior Year2006
    
    
    2005
    
    
    PeriodSalaries and wages
    
    $
    5,193
    
    
    $
    4,645
    
    
    $
    548Accounting, legal and consulting
    
    
    1,533
    
    
    
    2,661
    
    
    
    (1,128
    )Other
    
    
    7,966
    
    
    
    7,501
    
    
    
    465$
    14,692
    
    
    $
    14,807
    
    
    $
    (115
    )
   19




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##### Table of Contents



Interest Expense.
 Minority Interests.
 Provision for Income Taxes.
 Liquidity and Capital Resources
    20




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##### Table of Contents



Summary of Revolving Lines of Credit and Notes Payable
At March 31, 2006
 OutstandingCommitment
    
    
    Balance
    
    
    Interest Rate
    
    MaturityRevolving lines of creditThe Frost National Bank
    
    $
    20,000,000
    
    
    $
    13,297,000
    
    
    LIBOR plus 1.50%
    
    October 31, 2007The Frost National Bank
    
    
    3,000,000
    
    
    
    
    
    
    LIBOR plus 1.50%
    
    January 15, 2007Wachovia Bank, N.A.
    
    
    3,000,000
    
    
    
    548,000
    
    
    LIBOR plus 2.00%
    
    December 15, 2006$
    26,000,000
    
    
    
    13,845,000Notes payable  facility
    
    
    N/A
    
    
    
    1,627,000
    
    
    8.302%
    
    January 1, 2008$
    15,472,000
     21




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##### Table of Contents



22




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##### Table of Contents



USD:TWD
    
    USD:YUANDecember 31, 2004
    
    
    31.980
    
    
    
    8.287March 31, 2005
    
    
    31.875
    
    
    
    8.287June 30, 2005
    
    
    31.665
    
    
    
    8.287September 30, 2005
    
    
    33.270
    
    
    
    8.110December 31, 2005
    
    
    32.951
    
    
    
    8.073March 31, 2006
    
    
    32.568
    
    
    
    8.035
    23




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##### Table of Contents



Disclosure Controls and Procedures
  Changes in Internal Controls
  24




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##### Table of Contents



PART II
OTHER INFORMATION
 
   
   
   
   
   
   25




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##### Table of Contents



Exhibits2.1
    
    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, filed as Exhibit 10.1 to the Current Report on Form 8-K dated
March 1, 2005 (File No. 000-2667) 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-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 to 4.2 to the Companys For 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 date July 9, 1999 (File No. 000-266667) and incorporated by reference
herein.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 J. Marcus Scrudder, 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 J. Marcus Scrudder, 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 or furnished herewith. 26




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##### Table of Contents



CRAFTMADE INTERNATIONAL, INC.(Registrant)Date: May 10, 2006
    
    /s/ James R. RidingsJAMES R. RIDINGSChairman of the Board andChief Executive OfficerDate: May 10, 2006
    
    /s/ J. Marcus ScrudderJ. MARCUS SCRUDDERChief Financial Officer
 27




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##### Table of Contents



Index to Exhibits
 ExhibitNumber
    
    Description2.1
    
    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, filed as Exhibit 10.1 to the Current Report on Form 8-K dated
March 1, 2005 (File No. 000-2667) 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-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 to 4.2 to the Companys For 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 date July 9, 1999 (File No. 000-266667) and incorporated by reference
herein.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 J. Marcus Scrudder, 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 J. Marcus Scrudder, 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 or furnished herewith. 28