<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, 1996 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.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2057054
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
650 South Royal Lane, Suite 100, Coppell, Texas 75019
- ----------------------------------------------- -----
(Address of principal executive offices) Zip Code
Registrants' telephone number, including area code (214) 393-3800
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x. No .
----- -----
3,192,969 shares of Common Stock were outstanding as of April 26, 1996.
<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, 1996 and 1995.
Condensed Consolidated Balance Sheets as of March 31, 1996
and June 30, 1995.
Condensed Consolidated Statement of Changes in
Shareholders' Equity for the nine months ended March 31,
1996.
Condensed Consolidated Statements of Cash Flows for the
nine months ended March 31, 1996 and 1995.
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,
1995 1996 1995 1996
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $7,907,629 $8,531,715 $25,550,121 $25,662,081
Cost of goods sold 5,297,473 5,502,073 16,483,420 16,629,932
---------- ---------- ----------- -----------
Gross profit 2,610,156 3,029,642 9,066,701 9,032,149
---------- ---------- ----------- -----------
Selling, general
and administrative
expenses 2,194,429 2,321,541 6,386,203 6,657,734
Interest expense,net 128,650 275,965 360,548 574,789
Depreciation and
amortization 55,058 96,784 184,702 182,502
---------- ---------- ----------- -----------
Total expenses 2,378,137 2,694,290 6,931,453 7,415,025
---------- ---------- ----------- -----------
Income before
income taxes 232,019 335,352 2,135,248 1,617,124
Provision for
income taxes 85,850 121,080 781,040 519,300
---------- ---------- ----------- -----------
Net income $ 146,169 $ 214,272 $ 1,354,208 $ 1,097,824
========== ========== =========== ===========
Earnings per
common share $ .04 $ .07 $ .39 $ .34
========== ========== =========== ===========
Weighted average
shares outstanding 3,443,918 3,215,043 3,472,892 3,274,228
========== ========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 4
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31,
June 30, 1996
1995 (Unaudited)
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 268,703 $ 109,536
Accounts receivable - trade,
net of allowance 6,383,071 5,985,790
Inventory 8,605,483 9,401,197
Prepaid expenses and other
current assets 1,462,990 1,659,648
----------- -----------
Total current assets 16,720,247 17,156,171
----------- -----------
Property and equipment, net 396,758 9,716,890
----------- -----------
Other assets:
Goodwill, net 282,857 241,125
Other assets 230,773 187,771
----------- -----------
Total other assets 513,630 428,896
----------- -----------
$17,630,635 $27,301,957
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 5
CRAFTMADE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31,
June 30, 1996
1995 (Unaudited)
----------- -----------
<S> <C> <C>
Current liabilities:
Payable to bank $ - $ 306,395
Note payable, facility-
current portion - 478,863
Revolving line of credit 7,480,000 7,500,000
Accounts payable - trade and
commissions 346,303 376,788
Income taxes payable 136,961 -
Other accrued liabilities 101,987 95,274
----------- -----------
Total current liabilities 8,065,251 8,757,320
----------- -----------
Note payable, facility -
long term portion - 8,644,903
----------- -----------
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,
4,100,883 and 4,092,483 shares
issued as of March 31, 1996 and
June 30, 1995, respectively 40,925 41,009
Additional paid-in capital 7,024,265 7,058,301
Retained earnings 7,528,338 8,528,523
----------- -----------
14,625,528 15,659,833
Less: treasury stock, 907,914
and 801,414 common shares at
cost as of March 31, 1996 and
June 30, 1995, respectively
and 32,000 preferred shares at cost (5,060,144) (5,760,099)
----------- -----------
Total shareholders' equity 9,565,384 9,899,734
----------- -----------
$17,630,635 $27,301,957
=========== ===========
</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, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Series A Additional
Voting Preferred Paid-in Retained
Common Stock Stock Capital Earnings Treasury Stock Total
--------------------- --------- ----------- ---------- -------------- -----------
Shares Amount Amount
--------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of June 30, 1995 4,092,483 $ 40,925 $ 32,000 $ 7,024,265 $7,528,338 ($5,060,144) $ 9,565,384
Cash Dividends - - - - (97,639) - (97,639)
Employee Stock Options 8,400 84 - 34,036 - - 34,120
Stock Repurchase - - - - (699,955) (699,955)
Net Income for the nine months
ended March 31, 1996 - - - - 1,097,824 - 1,097,824
--------- ------- -------- ----------- ---------- ----------- -----------
4,100,883 $41,009 $ 32,000 $ 7,058,301 $8,528,523 ($5,760,099) $ 9,899,734
========= ======= ======== =========== ========== =========== ===========
</TABLE>
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,
1995 1996
--------- ----------
<S> <C> <C>
Net cash provided by
operating activities $ 220,820 $ 945,322
--------- ----------
Cash flows from investing activities:
Net additions to equipment (84,610) (9,455,946)
--------- ----------
Cash flows from financing activities:
Facility acquisition financing - 9,200,000
Note payments on facility - (76,234)
Stock Repurchase (1,652,625) (699,955)
Net proceeds from revolving
line of credit 1,725,000 20,000
Proceeds from exercise of stock
options 25,900 5,880
Cash dividends (102,627) (97,639)
Other financing activities (12,876) (595)
--------- ----------
Net cash provided by (used for)
financing activities (17,228) 8,351,457
--------- ----------
Net increase(decrease)in cash 118,982 (159,167)
Cash at beginning of year 116,311 268,703
--------- ----------
Cash at end of period $ 235,293 $ 109,536
========= ==========
</TABLE>
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-----------------------------
March 31, March 31,
1995 1996
--------- ----------
<S> <C> <C>
Cash paid during the period for:
Interest $360,548 $574,789
======== ========
Income taxes $943,934 $775,000
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF CRAFTMADE INTERNATIONAL, INC.
AND SUBSIDIARIES
MARCH 31, 1996
(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, 1995. 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 December 28, 1995, the Company's Board of Directors, by unanimous consent,
amended the stock repurchase plan to allow the Company to repurchase up to
300,000 shares of its issued and outstanding common stock, an increase of
100,000 shares over the original plan. At March 31, 1996, the Company had
repurchased 298,500 of such shares at an aggregate cost of $2,352,580.
Note 3 - FACILITIES
During December 1995, the Company's new facility, consisting of 378,000 square
feet of general office and warehouse space, was completed and operations were
relocated. The purchase price for this new facility was $9,207,559, which was
financed through a financial institution at an interest rate of 8.125% for a
term of
<PAGE> 9
twelve years. The Company has leased 80,000 square feet of this new facility
to an unaffiliated company for $20,000 a month for a term of three years.
At March 31, 1996, the future principal payments on long-term debt are as
follows:
<TABLE>
<S> <C>
1996 $ 478,863
1997 519,252
1998 563,050
1999 610,538
2000 662,036
Thereafter 6,290,027
----------
$9,123,766
==========
</TABLE>
<PAGE> 10
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
Net sales increased $624,086, or 7.9%, for the three months ended March 31,
1996 to $8,531,715, up from $7,907,629 for the same three month period last
year. For the nine months ended March 31, 1996, net sales were $25,662,081, an
increase of $111,960, or .4%, over net sales of $25,550,121 for the same nine
month period last year. The third quarter increase was primarily attributable
to a 4.7% increase in fan sales resulting from the stabilization of housing
starts and the expansion of this division's customer base. This increase was
complimented by a 45.9% increase in lamp sales over last year's third quarter
as lamp production recovered from the impact of the move to the Company's new
facility in the second quarter of this year.
Gross profit for the three month period ended March 31 increased from
$2,610,156, or 33.0% of sales, in 1995 to $3,029,642, or 35.5% of sales, in
1996. For the nine month period ended March 31, gross profit decreased from
$9,066,701, or 35.5% of sales, in 1995 to $9,032,149, or 35.2% of sales, in
1996. The recovery of gross profit percentage experienced in the third quarter
resulted primarily in the increased productivity of the lamp division and the
stabilization of raw materials costs associated with the manufacture of the fan
division's product over last year.
Total selling, general and administrative expenses increased $127,112 to
$2,321,541, or 27.2% of sales, for the three months ended March 31, 1996,
compared to $2,194,429, or 27.8% of sales, for the same three month period last
year. Total selling, general and administrative expenses increased $271,531 to
$6,657,734, or 25.9% of sales, for the nine months ended March 31, 1996,
compared to $6,386,203, or 25.0% of sales, for the same nine month period last
year. These increases were primarily attributable to certain expenses
associated with the recent relocation of the Company to its new facility,
partially offset by the reduction in operating lease expense. With the
completion of this relocation and its associated costs, the Company's
management anticipates that selling, general and administrative expenses as a
percentage of net sales will more closely reflect the previous year's levels.
Interest expense increased $147,315, to $275,965 for the three months ended
March 31, 1996 from $128,650 for the same three month period last year. For
the nine months ended March 31, 1996, interest expense was $574,789, an
increase of $214,241 from interest expense of $360,548 for the same nine month
period last
<PAGE> 11
year. These increases were primarily the result of $147,770 in interest
incurred relating to the financing of the Company's newly-acquired facility.
The Company's management anticipates that the increase in interest expense will
be partially offset by the decrease in operating lease expense. In addition,
management believes the long-term ownership of this facility should prove
advantageous for the Company as future lease arrangements for adequate facility
space would have resulted in an obligation in excess of the current annual debt
requirement under the new facility note payable and related depreciation and
interest expense.
Liquidity and Capital Resources
The Company's cash decreased $159,167, from $268,703 at June 30, 1995 to
$109,539 at March 31, 1996. The Company's operating activities provided cash
of $945,322. This cash was primarily provided by net income of $1,097,824 and
decreases in accounts receivable, partially offset by increases in inventory
levels.
Cash used for investing activities of $9,455,946 related primarily to the
acquisition of the Company's new facility and the purchase of certain office,
computer and warehouse equipment.
Cash provided by financing activities of $8,351,457 was primarily the result of
financing obtained for the new facility of $9,200,000 less principal payments
of $76,234 made towards this note, partially offset by cash dividends totaling
$97,639 and the repurchase of 106,500 shares of the Company's common stock in
connection with the Company's stock repurchase plan at an aggregate cost of
$699,955.
At March 31, 1996, pursuant to the continued compliance with certain covenants
and restrictions, the Company had an additional $4,500,000 available on its
$12,000,000 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, annual payments under the note payable
related to the facility acquisition approximating $1,600,000 and its projected
growth over the next twelve months.
Cautionary Statement
The disclosures under "Results of Operations" and "Liquidity and Capital
Resources" above contain forward-looking statements. There are certain
important factors which could cause results to differ materially than those
anticipated by some of the forward- looking statements. Some of the important
factors which could cause actual results to differ materially from those in the
forward-looking statements include, among other things, changes from anticipated
levels of sales, whether due to future national or regional economic and
competitive conditions, customer acceptance of existing and new products, or
otherwise, pricing pressures due to excess capacity, raw material cost
increases, change of tax rates, change of interest rates, unfavorable political
developments in the Republic of Taiwan, the location of the Company's principal
vendor, declining conditions in the home construction industry, and other
uncertainties, all of which are difficult to predict and many of which are
beyond the control of the Company.
<PAGE> 12
PART II
OTHER INFORMATION
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
27 Financial Data Schedule
b). Reports on Form 8-K
none
<PAGE> 13
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.
CRAFTMADE INTERNATIONAL, INC.
-----------------------------
(Registrant)
Date April 26, 1996 JAMES R. RIDINGS
-------------------- -----------------------------
JAMES R. RIDINGS
President and Chief
Executive Officer
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 110
<SECURITIES> 0
<RECEIVABLES> 5,986
<ALLOWANCES> 0
<INVENTORY> 9,401
<CURRENT-ASSETS> 17,156
<PP&E> 9,717
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,302
<CURRENT-LIABILITIES> 8,757
<BONDS> 0
<COMMON> 41
0
32
<OTHER-SE> 15,587
<TOTAL-LIABILITY-AND-EQUITY> 27,302
<SALES> 8,531
<TOTAL-REVENUES> 8,531
<CGS> 5,502
<TOTAL-COSTS> 5,502
<OTHER-EXPENSES> 2,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 276
<INCOME-PRETAX> 335
<INCOME-TAX> 121
<INCOME-CONTINUING> 214
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 214
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
