<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15D OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15D OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________
TO ___________
Commission File Number
-----------------------
1-10471
CRAFTMADE INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 75-2057054
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(State or other jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
2700 112th Street, Grand Prairie, Texas 75050
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(Address of principal executive offices) (Zip Code)
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Registrants' telephone number, including area code (214) 647-8099
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 / /
3,291,069 shares of Common Stock were outstanding as of April 28, 1995
<PAGE> 2
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
Index to Quarterly Report on Form 10-Q
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Income for the three
months and nine months ended March 31, 1995 and 1994.
Condensed Consolidated Balance Sheets as of March 31, 1995 and
June 30, 1994.
Condensed Consolidated Statement of Changes in Shareholders'
Equity for the nine months ended March 31, 1995.
Condensed Consolidated Statements of Cash Flows for the nine
months ended March 31, 1995 and 1994.
Notes to Condensed Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Changes in 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
<PAGE> 3
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
--------------------------- -------------------------
March 31, March 31 March 31, March 31,
1994 1995 1994 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 7,988,654 $ 7,907,629 $22,880,573 $25,550,121
Cost of goods sold 4,983,627 5,297,473 14,599,489 16,483,420
----------- ----------- ----------- -----------
Gross profit 3,005,027 2,610,156 8,281,084 9,066,701
----------- ----------- ----------- -----------
Selling, general
and administrative
expenses 2,066,914 2,194,429 5,366,563 6,386,203
Interest expense, net 77,076 128,650 245,025 360,548
Depreciation and
amortization 58,021 55,058 180,340 184,702
----------- ----------- ----------- -----------
Total expenses 2,202,011 2,378,137 5,791,928 6,931,453
----------- ----------- ----------- -----------
Income before
income taxes 803,016 232,019 2,489,156 2,135,248
Provision for
income taxes 297,116 85,850 924,790 781,040
----------- ----------- ----------- -----------
Net income $ 505,900 $ 146,169 $ 1,564,366 $ 1,354,208
=========== =========== =========== ===========
Earnings per
common share $ .14 $ .04 $ .45 $ .39
=========== =========== =========== ===========
Weighted average
shares outstanding 3,467,172 3,443,918 3,467,259 3,472,892
=========== =========== =========== ===========
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SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 4
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
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<CAPTION>
June 30, March 31,
1994 1995
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(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 116,311 $ 235,293
Accounts receivable - trade,
net of allowance 6,835,133 5,611,996
Inventory 7,167,543 9,437,753
Prepaid expenses and other
current assets 758,725 679,614
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Total current assets 14,877,712 15,964,656
----------- -----------
Property and equipment, net 458,296 438,294
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Other assets:
Goodwill, net 338,501 296,768
Other assets 178,764 329,047
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Total other assets 517,265 625,815
----------- -----------
$15,853,273 $17,028,765
=========== ===========
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SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 5
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
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<CAPTION>
June 30, March 31,
1994 1995
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(Unaudited)
<S> <C> <C>
Current liabilities:
Payable to bank $ 5,725,000 $ 7,450,000
Accounts payable - trade and
commissions 306,234 340,618
Income taxes payable 219,144 -
Other accrued liabilities 194,069 74,538
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Total current liabilities 6,444,447 7,865,156
----------- -----------
Other non-current liabilities 36,247 8,927
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Shareholders' equity:
Series A cumulative, convertible,
callable preferred stock, $1.00
par value, 2,000,000 shares
authorized; 32,000 shares issued 32,000 32,000
Common stock, $.01 par value,
15,000,000 shares authorized,
4,055,483 and 4,092,483 shares
as of June 30, 1994 and March
31, 1995, respectively 40,555 40,925
Additional paid-in capital 6,841,488 7,024,265
Retained earnings 5,761,362 7,012,943
----------- -----------
12,675,405 14,110,133
Less: treasury stock, 609,414 and 788,914
common shares at cost at June 30, 1994
and March 31, 1995, respectively
and 32,000 preferred shares at cost (3,302,826) (4,955,451)
----------- -----------
Total shareholders' equity 9,372,579 9,154,682
----------- -----------
$15,853,273 $17,028,765
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 6
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
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<CAPTION>
Voting Series A Additional
Common Stock Preferred Paid-in Retained Treasury Stock
--------------------- Stock Capital Earnings ------------ Total
Shares Amount ------- ---------- ---------- Amount ---------
--------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of June 30, 1994 4,055,483 $40,555 $32,000 $6,841,488 $5,761,362 ($3,302,826) $9,372,579
Cash Dividends - - - - (102,627) - (102,627)
Employee Stock Options 37,000 370 - 182,777 - - 183,147
Stock Repurchase - - - - - (1,652,625) (1,652,625)
Net Income for the nine
months ended March 31, 1995 - - - - 1,354,208 - 1,354,208
--------- ------- ------- ---------- ---------- ------------ ----------
4,092,483 $40,925 $32,000 $7,024,265 $7,012,943 ($4,955,451) $9,154,682
========= ======= ======= ========== ========== ============ ==========
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SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 7
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
--------------------------
March 31, March 31,
1994 1995
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<S> <C> <C>
Net cash provided by (used for)
operating activities $ (190,071) $ 220,820
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Cash flows from investing activities:
Net additions to equipment (222,364) (84,610)
----------- -----------
Cash flows from financing activities:
Stock Repurchase --- (1,652,625)
Net proceeds from revolving line
of credit 325,000 1,725,000
Proceeds from exercise of stock
options 28,980 25,900
Cash dividends (34,461) (102,627)
Other financing activities (31,469) (12,876)
----------- -----------
Net cash provided by (used for)
financing activities 288,050 (17,228)
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Net increase (decrease) in cash (124,385) 118,982
Cash at beginning of year 211,007 116,311
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Cash at end of period $ 86,622 $ 235,293
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Supplemental disclosures of cash flow information:
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<CAPTION>
FOR THE NINE MONTHS ENDED
--------------------------
March 31, March 31,
1994 1995
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<S> <C> <C>
Cash paid during the period for:
Interest $ 245,025 $ 360,548
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Income taxes $ 805,438 $ 943,934
=========== ===========
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SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF CRAFTMADE INTERNATIONAL, INC.
AND SUBSIDIARIES
MARCH 31, 1995
(Unaudited)
Note 1 - BASIS OF PREPARATION AND PRESENTATION
-------------------------------------
The accompanying unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
and include all adjustments which are, in the opinion of management, necessary
for a fair presentation. The condensed consolidated financial statements
include the accounts of the Company and its subsidiaries. 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, 1994. The financial data for the interim periods may not necessarily
be indicative of results to be expected for the year.
Note 2 - STOCK REPURCHASE
----------------
On January 27, 1995, the Company's Board of Directors, by unanimous consent,
consented to the initiation of a stock repurchase plan that would allow the
Company to repurchase up to 200,000 shares of its issued and outstanding
common stock. At March 31, 1995, the Company had repurchased 179,500 of such
shares at an aggregate cost of $1,652,625.
<PAGE> 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results Of Operations
---------------------
Net sales decreased $81,025, or 1.0%, for the three months ended March 31, 1995
to $7,907,629, down from $7,988,654 for the same three month period last year.
For the nine months ended March 31, 1995, net sales were $25,550,121, an
increase of $2,669,548, or 11.7%, over sales of $22,880,573 for the same nine
month period last year. The Company's fan division experienced a 5.8% increase
in sales this quarter over the same quarter last year primarily from the
expansion of its customer base, despite a significant weakness in housing
starts throughout the nation. This increase was offset by a decrease in sales
in the lamp division of $434,281 this quarter over the same period last year
due to a general slowdown in this industry.
Gross profit for the three month period ended March 31 decreased from
$3,005,027 or 37.6% of sales in 1994 to $2,610,156 or 33.0% of sales in 1995,
representing a $394,871 decrease. For the nine month period ended March 31,
gross profit increased from $8,281,084 or 36.2% of sales in 1994 to $9,066,701
or 35.5% of sales in 1995, representing a $785,617 increase. These decreases in
gross margin percentages were the result of increases in costs of certain raw
materials associated with the manufacture of its products. The raw materials
cost increases relate to the increased demand for these materials. The Company
is taking steps to increase prices to its customers, which should allow
the Company to recover some of the decrease in gross margin in the fourth
quarter of this year.
Total selling, general and administrative expenses increased $127,515 to
$2,194,429, or 27.8% of sales, for the three months ended March 31, 1995,
compared to $2,066,914, or 25.9% of sales, for the same three month period last
year. Total selling, general and administrative expenses increased $1,019,640
to $6,386,203, or 25.0% of sales, for the nine months ended March 31, 1995,
compared to $5,366,563, or 23.5% of sales, for the same nine month period last
year. These increases were primarily attributable to increases in sales
commissions, royalties and certain other costs directly correlated to the
increases in fan sales, coupled with increases in salaries and related payroll
costs associated with the Company's increased workforce.
Interest expense increased $51,574, to $128,650 for the three months ended
March 31, 1995 from $77,076 for the same three month period in 1994. For the
nine months ended March 31, 1995, interest expense was $360,548, an increase of
$115,523 from interest expense of $245,025 for the same nine month period last
year. These increases were primarily the result of increases in the bank's
prime lending rate, coupled with increases in indebtedness required to finance
the Company's current growth and its stock repurchase program.
<PAGE> 10
Liquidity and Capital Resources
-------------------------------
The Company's cash increased $118,982, from $116,311 at June 30, 1994 to
$235,293 at March 31, 1995. The Company's operating activities, coupled with
decreases in accounts receivable but partially offset by increases in inventory
levels, provided cash of $220,820.
Cash used for investing activities of $84,610 related primarily to the purchase
of general warehouse and manufacturing equipment.
Cash used for financing activities of $17,228 was primarily the result of the
repurchase of 179,500 shares of the Company's common stock in connection with
the Company's recently-approved stock repurchase plan, at a total aggregate
cost of $1,652,625. This was offset partially by additional borrowing on the
Company's line of credit.
At March 31, 1995, pursuant to the continued compliance with certain covenants
and restrictions, the Company had an additional $2,550,000 available on its
$10,000,000 line of credit. The Company's management believes that its current
line of credit, combined with cash flows from operations, is adequate to fund
the Company's current operating needs, the remaining 20,500 shares of the
Company's common stock to be repurchased through the Company's stock repurchase
plan and its projected growth over the next twelve months.
<PAGE> 11
PART II
OTHER INFORMATION
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<S> <C>
Item 1. Legal Proceedings
-----------------
not applicable
Item 2. Changes in Securities
---------------------
not applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
not applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
not applicable
Item 5. Other Information
-----------------
not applicable
Item 6. Exhibits and Reports of Form 8-K
--------------------------------
a). Exhibits
none
b). Reports on Form 8-K
none
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<PAGE> 12
SIGNATURE
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.
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<S> <C> <C>
CRAFTMADE INTERNATIONAL, INC.
-----------------------------
(Registrant)
Date April 28, 1995 JAMES R. RIDINGS
----------------
JAMES R. RIDINGS
President and Chief
Executive Officer
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