Decorator Industries (DII) 10-Q 2011 Q2 Quarterly report

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 July 3, 2010

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-7753

DECORATOR INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	25-1001433
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10011 Pines Blvd., Suite #203-C, Pembroke Pines, Florida	33024
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code:  (954) 436-8909

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 þ No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ        No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,”  “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o                                                                      Accelerated filer  o                                           

Non-accelerated filer   o                                                                      Smaller reporting company  þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o   No þ

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Title of each class	Outstanding at August 17, 2010
Common Stock, Par Value $.20 Per Share	3,137,155 shares

PART I – FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS  

DECORATOR INDUSTRIES, INC

BALANCE SHEETS

ASSETS	July 3, 2010		January 2, 2010
Current Assets:	(UNAUDITED)
Cash and Cash Equivalents	$	937,240	$	156,171
Accounts Receivable, less allowance for
doubtful accounts ($264,333 and $269,080)		1,478,494		1,164,669
Inventories		1,914,515		2,107,151
Income Taxes Receivable		-		1,215,000
Other Current Assets		438,387		366,047
Total Current Assets		4,768,636		5,009,038
Property and Equipment
Land, Buildings & Improvements		2,872,421		2,872,421
Machinery, Equipment, Furniture & Fixtures and Software		7,012,810		7,270,508
Total Property and Equipment		9,885,231		10,142,929
Less: Accumulated Depreciation and Amortization		7,008,020		7,075,614
Active Assets, Net		2,877,211		3,067,315
Property Held for Sale, Net		3,132,989		3,357,565
Net Property and Equipment		6,010,200		6,424,880
Goodwill, less accumulated Amortization of $1,348,569		3,317,008		3,305,008
Deferred Income taxes		1,321,000		1,053,000
Other Assets		365,460		378,741
Total Assets	$	15,782,304	$	16,170,667
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	835,231	$	553,086
Current Maturities of Long-term Debt		3,248,640		3,526,484
Checks Issued But Not Yet Presented		-		135,518
Accrued Expenses:
Compensation		267,961		175,311
Other		915,637		811,234
Total Current Liabilities		5,267,469		5,201,633
Long-Term Debt		420,000		490,000
Total Liabilities		5,687,469		5,691,633
Stockholders' Equity
Common Stock $.20 par value: Authorized shares, 10,000,000;
Issued shares, 4,850,999 and 4,808,729		970,200		961,746
Paid-in Capital		2,152,912		2,098,287
Retained Earnings		15,284,646		15,731,924
		18,407,758		18,791,957
Less: Treasury stock, at cost: 1,713,844 shares		8,312,923		8,312,923
Total Stockholders' Equity		10,094,835		10,479,034
Total Liabilities and Stockholders' Equity	$	15,782,304	$	16,170,667

The accompanying notes are an integral part of the financial statements.

1

DECORATOR INDUSTRIES, INC

STATEMENTS OF EARNINGS

(UNAUDITED)

	For the Thirteen Weeks Ended										For the Twenty-Six Weeks Ended
	July 3, 2010					July 4, 2009					July 3, 2010					July 4, 2009
Net Sales	$	4,699,027		100.0	%	$	5,677,395		100.0	%	$	8,719,654		100.0	%	$	10,783,033		100.0	%
Cost of Products Sold		3,571,530		76.0	%		4,446,441		78.3	%		6,820,025		78.2	%		8,833,284		81.9	%
Gross Profit		1,127,497		24.0	%		1,230,954		21.7	%		1,899,629		21.8	%		1,949,749		18.1	%
Selling and Admin Expenses		1,252,297		26.6	%		1,830,651		32.2	%		2,531,466		29.0	%		4,319,641		40.1	%
Operating Loss		(124,800	)	-2.6	%		(599,697	)	-10.5	%		(631,837	)	-7.2	%		(2,369,892	)	-22.0	%
Other Income (Expense)
Interest, Investment and
Other Income		5,827		0.1	%		8,303		0.1	%		15,075		0.2	%		11,934		0.1	%
Interest Expense		(44,784	)	-1.0	%		(32,787	)	-0.6	%		(98,516	)	-1.2	%		(69,152	)	-0.6	%
Loss Before Income Taxes		(163,757	)	-3.5	%		(624,181	)	-11.0	%		(715,278	)	-8.2	%		(2,427,110	)	-22.5	%
Provision for Income Taxes		(60,000	)	-1.3	%		(258,000	)	-4.6	%		(268,000	)	-3.1	%		(770,000	)	-7.1	%
Net Loss	$	(103,757	)	-2.2	%	$	(366,181	)	-6.4	%	$	(447,278	)	-5.1	%	$	(1,657,110	)	-15.4	%
EARNINGS PER SHARE
Basic	$	(0.03	)			$	(0.12	)			$	(0.14	)			$	(0.56	)
Diluted	$	(0.03	)			$	(0.12	)			$	(0.14	)			$	(0.56	)
Weighted Average Number of Shares Outstanding
Basic		3,123,790					2,987,495					3,111,987					2,970,528
Diluted		3,123,790					2,987,495					3,111,987					2,970,528

The accompanying notes are an integral part of the financial statements.

2

DECORATOR INDUSTRIES, INC

STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Twenty-Six Weeks Ended
	July 3, 2010			July 4, 2009
Cash Flows From Operating Activities:
Net Loss	$	(447,278	)	$	(1,657,110	)
Adjustments to Reconcile Net Loss to Net Cash
Provided by/(Used in) Operating Activities
Depreciation and Amortization		164,085			261,832
Provision for Losses on Accounts Receivable		50,000			47,651
Deferred Taxes		(268,000	)		(770,000	)
Stock-Based Compensation		16,160			15,280
Loss/(Gain) on Disposal of Assets		(19,186	)		88,128
Noncash charges for asset impairment		-			365,500
Increase/(Decrease) from Changes in:
Accounts Receivable		(363,825	)		(383,680	)
Inventories		192,635			1,258,315
Income Taxes Receivable		1,215,000			-
Prepaid Expenses		(72,340	)		(207,092	)
Other Assets		13,281			(32,138	)
Accounts Payable		282,145			29,728
Accrued Expenses		208,085			(853,274	)
Net Cash Provided by/(Used in) Operating Activities		970,762			(1,836,860	)
Cash Flows From Investing Activities:
Net cash paid for acquisitions		(23,032	)		(8,672	)
Capital Expenditures		(2,969	)		(107,244	)
Proceeds from Property Dispositions		272,750			1,451,225
Net Cash Provided by/(Used in) Investing Activities		246,749			1,335,309
Cash Flows From Financing Activities:
Long-term Debt Payments		(60,000	)		(60,000	)
Change in Checks Issued but Not Yet Presented		(135,518	)		(68,333	)
Net Borrowings/(Payments) under Line-of-Credit Agreement		(287,844	)		855,000
Issuance of Stock for Directors Trust		39,000			42,500
Purchase of Common Stock for Treasury		7,920			-
Net Cash Provided by/(Used in) Financing Activities		(436,442	)		769,167
Net Increase in Cash and Cash Equivalents		781,069			267,616
Cash and Cash Equivalents at Beginning of Year		156,171			16,499
Cash and Cash Equivalents at End of Period	$	937,240		$	284,115
Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Interest	$	97,186		$	63,008
Income Taxes	$	-		$	-
Increase in Acquisition Cost/Goodwill	$	12,000		$	21,672
Working Capital, other than Cash		11,032			(13,000	)
Net Cash Paid for Acquisition/Goodwill	$	23,032		$	8,672

The accompanying notes are an integral part of the financial statements.

3

DECORATOR INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

TWENTY-SIX WEEKS ENDED JULY 3, 2010 AND JULY 4, 2009

(UNAUDITED)

NOTE 1. In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly the Company’s financial position as of July 3, 2010, the changes therein for the twenty-six week period then ended and the results of operations for the twenty-six week periods ended July 3, 2010 and July 4, 2009.

NOTE 2. The financial statements included in the Form 10-Q are presented in accordance with the requirements of the Form and do not include all of the disclosures required by accounting principles generally accepted in the United States of America.  For additional information, reference is made to the Company’s annual report on Form 10-K for the year ended January 2, 2010. The results of operations for the twenty-six week periods ended July 3, 2010 and July 4, 2009 are not necessarily indicative of operating results for the full year.

NOTE 3. INVENTORIES

Inventories at July 3, 2010 and January 2, 2010 consisted of the following:

	July 3, 2010		January 2, 2010
Raw Material and Supplies	$	1,568,500	$	1,653,893
In Process and Finished Goods		346,015		453,258
Total Inventory	$	1,914,515	$	2,107,151

NOTE 4. EARNINGS PER SHARE   Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding.  Diluted earnings per share includes the dilutive effect of stock options.  No dilution is shown for all periods since the effect of the stock options on the net loss is antidilutive.  In accordance with ASC Topic 260 “Earnings per Share” (formerly SFAS No. 128), the following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations:

	For the Thirteen Weeks Ended						For the Twenty-Six Weeks Ended
	July 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009
Numerator:
Net loss	$	(103,757	)	$	(366,181	)	$	(447,278	)	$	(1,657,110	)
Denominator:
Weighted-average number of
common shares outstanding		3,123,790			2,987,495			3,111,987			2,970,528
Dilutive effect of
stock options on net income		-			-			-			-
		3,123,790			2,987,495			3,111,987			2,970,528
Diluted earnings per share:	$	(0.03	)	$	(0.12	)	$	(0.14	)	$	(0.56	)

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NOTE 5. ASSET SALE   On May 28, 2010, the Company sold its Douglas, GA facility, which had been idle since October 2008.  The net proceeds from this sale were $208,360 and were used to pay down the line-of-credit with Wachovia Bank.  The Company recognized a loss on the building sale of $13,077 in the second quarter of 2010.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement: The Company's Reports on Form 10-K and Form 10-Q, its Current Reports on Form 8-K, and any other written or oral statements made by or on behalf of the Company contain or may contain statements relating to future events, including results of operations, that are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent the Company's expectations or belief as to future events and, by their very nature, are subject to risks and uncertainties which may result in actual events differing materially from those anticipated. In particular, future operating results will be affected by the level of demand for recreational vehicles, manufactured hou sing and hotel/motel accommodations, the general economic conditions, the Company’s ability to retain or replace its line-of-credit, interest rate fluctuations, the availability of consumer credit, availability of floor-plan credit for recreational vehicle and manufactured housing retail dealers, availability of financing for manufacturers, fuel prices, competitive products and pricing pressures within the Company's markets, the Company's ability to contain its manufacturing costs and expenses, and other factors. Any forward-looking statements by the Company speak only as of the date made, and the Company undertakes no obligation to update or revise such statements to reflect events or circumstances after such date or to reflect the occurrence of unanticipated events.

FINANCIAL CONDITION

The Company’s financial ratios changed as illustrated below.

	July 3, 2010			January 2, 2010
Current Ratio	0.90:1			0.96:1
Quick Ratio	0.54:1			0.56:1
Funded Debt to Total Capital		26.7	%		27.7	%
Working Capital	$	(498,833	)	$	(192,595	)

On April 20, 2010 the Company entered into a loan agreement with Crestmark Bank (Crestmark). The agreement provides up to $2,000,000 of borrowing availability to be repaid on a demand basis and is secured by the Company’s accounts receivable and inventory and their products and proceeds. Crestmark will advance up to 85% of the eligible accounts receivable. The term of the agreement is two years.  The available funds will be used for working capital requirements of the Company. The interest rate on borrowed funds will be prime plus 3.50%, but will not be lower than 6.75%. Fees include a one percent commitment fee, payable monthly, and a maintenance fee equal to the greater of .4% of the average monthly loan balance or $2,500. The Company will also be responsible for other fees associated with the facility.  The Company must maintain a tangible net worth of not less than $5,000,000 and its working capital ratio, excluding its debt to Wachovia Bank, must not be less than 1.20:1.  At July 3, 2010 the tangible net worth was $5,973,980 and the current ratio, excluding the Wachovia debt, was 2.21:1.  The Company has not borrowed against this facility to date.

5

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

The loan balance with Wachovia was $3,113,640 at July 3, 2010. Wachovia no longer provides working capital to the Company and this loan is collateralized by five of the Company’s properties and matures on December 31, 2010. Should any of this real estate be sold, the net proceeds will pay down the balance of the loan. By December 31, 2010, the Company plans to achieve one or more of the following:

1)   Sell the real estate pledged to Wachovia and reduce or pay-off the balance;

2)   Complete additional Sale/Leaseback transactions on real-estate;

3)   Find an alternative lender(s) to replace Wachovia as its real-estate lender;

4)   Negotiate with Wachovia to extend the terms of the loan.

The Company received the $855,847 balance of its Income Tax Receivable in the Second Quarter.  The cash from the tax refund in addition to the available loan balance from Crestmark will provide adequate working capital for operations for the balance of 2010.

The Company’s proposed sale/leaseback of its two Alabama properties did not materialize.  The Company continues to market its Alabama properties for sale/leaseback.

Days Sales Outstanding (DSO) in accounts receivable were 28.6 days at July 3, 2010 compared to 30.6 days and 40.0 days at January 2, 2010 and July 4, 2009, respectively.  Net accounts receivable was $1,478,494 at July 3, 2010, compared to $1,164,669 and $2,550,285 at January 2, 2010 and July 4, 2009, respectively.   The decrease in accounts receivable compared to July 4, 2009 is due to the reduced sales volumes in the current year.

Inventories were $1,914,515 at July 3, 2010, as compared to $2,107,151 and $2,525,266 at January 2, 2010 and July 4, 2009, respectively.   The inventory declines are due to lower sales volume.

Capital expenditures were $2,969 for the first six months of 2010, compared to $107,244 for the same period of the prior year.  Capital expenditures over the remainder of 2010 will be approximately $300,000, most of which will be for the capitalization of a software modification project.

SALES BY MARKET

The following table represents net sales to each of the three different markets that the Company serves for the periods indicated:

	For the Thirteen Weeks Ended										For the Twenty-Six Weeks Ended
$(000)	July 3, 2010					July 4, 2009					July 3, 2010					July 4, 2009
	Net		% of			Net		% of			Net		% of			Net		% of
	Sales		total			Sales		total			Sales		total			Sales		total
Recreational Vehicle	$	1,230		26	%	$	1,064		19	%	$	2,513		29	%	$	1,917		18	%
Manufactured Housing		1,361		29	%		1,369		24	%		2,435		28	%		2,669		25	%
Hospitality		2,108		45	%		3,244		57	%		3,772		43	%		6,197		57	%
Total Net Sales	$	4,699		100	%	$	5,677		100	%	$	8,720		100	%	$	10,783		100	%

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS

Thirteen Week Period Ended July 3, 2010, (Second Quarter 2010) compared to

Thirteen Week Period Ended July 4, 2009, (Second Quarter 2009)

The following table shows a comparison of the results of operations between Second Quarter 2010 and Second Quarter 2009:

	Second Quarter			%			Second Quarter			%			$ Increase
	2010			of Sales			2009			of Sales			(Decrease)			% Change
Net Sales	$	4,699,027			100	%	$	5,677,395			100	%	$	(978,368	)		-17.2	%
Cost of Products Sold		3,571,530			76.0	%		4,446,441			78.3	%		(874,911	)		-19.7	%
Gross Profit		1,127,497			24.0	%		1,230,954			21.7	%		(103,457	)		-8.4	%
Selling and Admin Expenses		1,252,297			26.6	%		1,830,651			32.2	%		(578,354	)		-31.6	%
Operating Loss		(124,800	)		-2.6	%		(599,697	)		-10.5	%		474,897			-79.2	%
Other Income/(Expense)
Interest, Investment and
Other Income		5,827			0.1	%		8,303			0.1	%		(2,476	)		-29.8	%
Interest Expense		(44,784	)		-1.0	%		(32,787	)		-0.6	%		(11,997	)		36.6	%
Loss Before Income Taxes		(163,757	)		-3.5	%		(624,181	)		-11.0	%		460,424			-73.8	%
Provision for Income Taxes		(60,000	)		-1.3	%		(258,000	)		-4.6	%		198,000			-76.7	%
Net Loss	$	(103,757	)		-2.2	%	$	(366,181	)		-6.4	%	$	262,424			-71.7	%

Net sales for the Second Quarter 2010 were $4,699,027, compared to $5,677,395 for the same period in the previous year, a 17.2% decrease.  Sales to the Company’s recreational vehicle customers increased 58.2% in Second Quarter 2010 when compared to the same period of the prior year.  The increase is net of the discontinued sewn products for the RV industry.  The recreational vehicle industry reported a 79.9% increase in shipments during the Second Quarter 2010 compared to the same period of the prior year.  Sales to the Company’s manufactured housing customers decreased 0.6% in Second Quarter 2010 when compared to the same period of the prior year.  The manufactured housing industry showed a 16.7% increase in shipments during the Second Quarter 2010 compared to the same peri od of the prior year. Sales to the Company’s hospitality customers decreased 35.0% in the Second Quarter 2010 when compared to the same period of the prior year.  The decline in hospitality sales is a result of lower levels of activity for both new construction and refurbishment of hospitality properties.

Cost of products sold decreased to 76.0% of net sales in the Second Quarter 2010 compared to 78.3% of net sales a year ago, due to improved labor efficiencies, reduced overhead, and was somewhat offset by higher material costs.

7

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Selling and administrative expenses were $1,252,297 in the Second Quarter 2010 versus $1,830,651 in the Second Quarter 2009.  Included in 2009 was a facility closing cost of $150,000 and a loss on the sale of facilities of $97,714.  Without these charges, the selling and administrative expense would have been $1,582,937 in 2009.  The second quarter of 2010 benefitted by $75,720 from various one-time gains.  Without these gains, selling and administrative expense would have been $1,328,017.  The reduction in adjusted expense of $254,920 was due to reductions in staff and salary cuts.  The percentage of selling and administrative expenses to net sales decreased from 32.2% to 26.6%.

Net loss was $103,757 in the Second Quarter 2010 compared to net loss of $366,181 in the Second Quarter 2009.  The decrease in the loss was due to improved margin and the reduction in selling and administrative costs, somewhat offset by the 17% decrease in net sales.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Twenty-Six Week Period Ended July 3, 2010, (First Six Months 2010) compared to

Twenty-Six Week Period Ended July 4, 2009, (First Six Months 2009)

The following table shows a comparison of the results of operations between First Six Months 2010 and First Six Months 2009:

	First						First
	Six Months			%			Six Months			%			$ Increase
	2010			of Sales			2009			of Sales			(Decrease)			% Change
Net Sales	$	8,719,654			100	%	$	10,783,033			100	%	$	(2,063,379	)		-19.1	%
Cost of Products Sold		6,820,025			78.2	%		8,833,284			81.9	%		(2,013,259	)		-22.8	%
Gross Profit		1,899,629			21.8	%		1,949,749			18.1	%		(50,120	)		-2.6	%
Selling and Admin Expenses		2,531,466			29.0	%		4,319,641			40.1	%		(1,788,175	)		-41.4	%
Operating Loss		(631,837	)		-7.2	%		(2,369,892	)		-22.0	%		1,738,055			-73.3	%
Other Income/(Expense)
Interest, Investment and
Other Income		15,075			0.2	%		11,934			0.1	%		3,141			26.3	%
Interest Expense		(98,516	)		-1.2	%		(69,152	)		-0.6	%		(29,364	)		42.5	%
Loss Before Income Taxes		(715,278	)		-8.2	%		(2,427,110	)		-22.5	%		1,711,832			-70.5	%
Provision for Income Taxes		(268,000	)		-3.1	%		(770,000	)		-7.1	%		502,000			-65.2	%
Net Loss	$	(447,278	)		-5.1	%	$	(1,657,110	)		-15.4	%	$	1,209,832			-73.0	%

Net sales for the First Six Months 2010 were $8,719,654, compared to $10,783,033 for the same period in the previous year, a 19.1% decrease.  Sales to the Company’s recreational vehicle customers increased 75.4% in the First Six Months 2010 when compared to the same period of the prior year.  This increase is net of the discontinued sewn products for the RV industry.  The recreational vehicle industry reported an 87.1% increase in shipments during the first half of 2010 compared to the same period of the prior year.  Sales to the Company’s manufactured housing customers decreased 8.8% in the First Six Months 2010 when compared to the same period of the prior year.  The manufactured housing industry showed an 8.2% increase in shipments during the First Six Months 2010 compare d to the same period of the prior year.  Sales to the Company’s hospitality customers decreased 39.1% in the First Six Months 2010 when compared to the same period of the prior year.  The decline in hospitality sales is a result of lower levels of activity for both new construction and refurbishment of hospitality properties.

Cost of products sold decreased to 78.2% of net sales in the First Six Months 2010 compared to 81.9% of net sales a year ago, due to improved labor efficiencies, reduced overhead, and in the prior year, higher inventory obsolescence charges resulting from bankruptcies filed by Fleetwood Enterprises and Monaco Coach.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Selling and administrative expenses were $2,531,466 in the First Six Months 2010 versus $4,319,641 in the First Six Months 2009.  The expenses for the First Six Months 2009 included charges of $900,000 related to the write-off of impaired assets and the closing of underperforming facilities.  Excluding the write-offs, selling and administrative expenses were $888,175 less in 2010 than in 2009.  The decrease came from reductions in employees, compensation, benefits, commissions, and bad debt.  The percentage of selling and administrative expenses to net sales decreased from 40.1% for the First Six Months 2009 to 29.0% for the First Six Months 2010.

Net loss was $447,278 for the First Six Months of 2010, compared to a net loss of $1,657,110 for the First Six Months of 2009.  The reduction in the net loss was mostly attributable to the plant closing costs of $900,000 (pre-tax) recognized in 2009, but also to improved margins and reduced selling and administrative costs.  The improvement was achieved despite a 19% reduction in net sales.

EBITDA

EBITDA represents income before income taxes, interest expense, depreciation and amortization and is an approximation of cash flow from operations before tax.  The Company uses EBITDA as an internal measure of performance and believes it is a useful and commonly used measure of financial performance in addition to income before taxes and other profitability measures under U.S. Generally Accepted Accounting Principles (“GAAP”).

EBITDA is not a measure of performance under GAAP.  EBITDA should not be construed as an alternative to operating income and income before taxes as an indicator of the Company’s operations in accordance with GAAP.  Nor is EBITDA an alternative to cash flow from operating activities in accordance with GAAP.  The Company’s definition of EBITDA can differ from that of other companies.

The following table reconciles Net Income, the most comparable measure under GAAP, to EBITDA for the thirteen and twenty-six week periods ended July 3, 2010 and July 4, 2009:

	For the Thirteen Weeks Ended						For the Twenty-Six Weeks Ended
	July 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009
Net Loss	$	(103,757	)	$	(366,181	)	$	(447,278	)	$	(1,657,110	)
Add:
Interest		44,784			32,787			98,516			69,152
Taxes		(60,000	)		(258,000	)		(268,000	)		(770,000	)
Depreciation & Amortization		81,492			114,869			164,085			261,832
Loss/(Gain) on Disposal of Assets		(34,002	)		95,145			(19,186	)		88,128
Noncash charge for Asset Impairment		-			30,000			-			365,500
EBITDA	$	(71,483	)	$	(351,380	)	$	(471,863	)	$	(1,642,498	)

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ITEM 4.  CONTROLS AND PROCEDURES.

(a)  The Company’s principal executive officer and principal financial officer have reviewed the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of July 3, 2010 and have concluded that they were adequate and effective, based on the evaluation of such disclosure controls and procedures required by paragraph (b) of Rules 13a-15 and 15d-15.

(b)  During the last fiscal quarter, there was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 6.   EXHIBITS

31.1  -           Certification of Principal Executive Officer

31.2  -           Certification of Principal Financial Officer

32  -              Certificate required by 18 U.S.C. §1350.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DECORATOR INDUSTRIES, INC. (Registrant)
Date: August 17 , 2010	By:	/s/ William A. Johnson
		William A. Johnson, President and Chief Executive Officer
Date: August 17, 2010	By:	/s/ Michael K. Solomon
		Michael K. Solomon, Chief Financial Officer

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