SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED JUNE 29, 1996
[] 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 (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10011 PINES BLVD., SUITE 201, PEMBROKE PINES, FL 33024
- ------------------------------------------------ -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
954-436-8909
------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X . NO .
---- ---
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT AUGUST 1, 1996
- ----- -----------------------------
COMMON STOCK, $.20 PAR VALUE 2,342,856 SHARES*
*INCLUDES 31,217 SHARES ISSUABLE UPON SURRENDER OF THE
OUTSTANDING $.10 PAR COMMON STOCK.
PART 1 - FINANCIAL INFORMATION
DECORATOR INDUSTRIES, INC.
BALANCE SHEET
June 29, 1996 December 30, 1995
------------- -----------------
ASSETS (UNAUDITED)
- ------
CURRENT ASSETS:
Cash and Cash Equivalents $3,501,145 $5,269,772
Short-term Investments 2,421,757 14,607
Accounts Receivable 3,667,729 2,776,039
Note Receivable 80,000 80,000
Inventories 3,010,995 3,005,383
Prepaid Expenses 157,628 126,373
Prepaid and Deferred Income Taxes 159,000 159,000
-------------- --------------
Total Current Assets 12,998,254 11,431,174
PROPERTY & EQUIPMENT 5,174,340 5,076,864
Less: Accumulated Depreciation
and Amortization 2,081,882 1,988,557
-------------- --------------
Net Value of Property and Equipment 3,092,458 3,088,307
EXCESS OF COST OVER NET ASSETS ACQUIRED 1,432,212 1,461,605
NOTE RECEIVABLE 100,000 140,000
OTHER ASSETS 208,519 294,573
-------------- --------------
TOTAL ASSETS $17,831,443 $16,415,659
-------------- --------------
-------------- --------------
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
CURRENT LIABILITIES:
Accounts Payable $3,660,553 $2,751,329
Accrued Expenses - Income Taxes 235,285 60,873
- Compensation 998,125 1,072,321
- Other 394,430 580,267
Current Maturities of Long-term Debt 41,355 41,032
-------------- --------------
Total Current Liabilities 5,329,748 4,505,822
LONG-TERM DEBT 566,649 587,083
DEFERRED INCOME TAXES 175,000 175,000
-------------- --------------
Total Liabilities 6,071,397 5,267,905
STOCKHOLDERS' EQUITY:
Common Stock 540,828 528,973
Additional Capital 1,501,972 1,692,185
Retained Earnings 11,276,171 12,228,865
-------------- --------------
13,318,971 14,450,023
Less: Treasury Stock, at Cost 1,558,925 3,302,269
-------------- --------------
Total Stockholders' Equity 11,760,046 11,147,754
-------------- --------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $17,831,443 $16,415,659
-------------- --------------
-------------- --------------
The accompanying notes are an integral part of the financial statements
1
DECORATOR INDUSTRIES, INC.
STATEMENT OF INCOME (UNAUDITED)
FOR 13 WEEKS ENDED: FOR 26 WEEKS ENDED:
June 29, 1996 July 1, 1995 June 29, 1996 July 1, 1995
------------- ------------ ------------- ------------
NET SALES $10,540,139 $8,749,072 $19,988,882 $17,024,503
Cost and Expenses:
Cost of Products Sold 7,706,744 6,505,447 14,818,923 12,548,775
Selling & Administrative 1,473,563 1,269,880 2,864,438 2,538,155
Interest & Investment Income (45,059) (115,718) (102,846) (249,968)
Interest Expense 9,343 12,180 21,093 27,813
--------- --------- ---------- ----------
TOTAL COST AND EXPENSES 9,144,591 7,671,789 17,601,608 14,864,775
--------- --------- ---------- ----------
Income Before Income Taxes 1,395,548 1,077,283 2,387,274 2,159,728
Income Taxes 485,000 400,000 854,000 802,000
--------- --------- ---------- ----------
NET INCOME $910,548 $677,283 $1,533,274 $1,357,728
--------- --------- ---------- ----------
--------- --------- ---------- ----------
PRIMARY EARNINGS
PER SHARE(A) $0.39 $0.26 $0.66 $0.52
----- ----- ----- -----
----- ----- ----- -----
FULLY DILUTED EARNINGS
PER SHARE(A) $0.37 $0.24 $0.62 $0.48
----- ----- ----- -----
----- ----- ----- -----
Average number of
shares outstanding:(A)
Primary 2,326,990 2,596,022 2,317,438 2,628,224
Fully diluted 2,478,501 2,797,437 2,480,366 2,847,309
(A) Restated to reflect four-for-three stock split effective June 17, 1996.
The accompany notes are an integral part of the financial statements.
2
DECORATOR INDUSTRIES, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
For 26 Weeks Ended:
JUNE 29, 1996 JULY 1,1995
--------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $1,533,274 $1,357,729
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 199,175 187,407
Provision for losses on accounts receivable 25,000 17,000
(Gain) loss on disposal of assets 139 980
Increase (decrease) from changes in:
Accounts receivable (916,690) (618,706)
Inventory (5,612) (238,058)
Short-term investments (2,407,150) (162,350)
Prepaid expenses (31,255) (148,442)
Other assets 86,054 11,172
Accounts payable 909,224 690,739
Accrued expenses (85,621) (584,500)
--------------- -------------
Net cash provided by (used in) operating activities (693,462) 512,971
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (176,720) (198,385)
Proceeds from property dispositions 1,410 2,049
Note receivable 40,000 40,000
--------------- -------------
Net cash used in investing activities (135,310) (156,336)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long term debt payments (20,111) (31,596)
Dividend payments (284,429) (251,850)
Proceeds from exercise of stock options 128,514 40,765
Stock option tax benefit 6,000 0
Purchase of common stock for treasury (769,829) (964,979)
--------------- -------------
Net cash provided by financing activities (939,855) (1,207,660)
Net increase in cash and cash equivalents (1,768,627) (851,025)
Cash and cash equivalents at beginning of year 5,269,772 4,026,035
--------------- -------------
Cash and cash equivalents at end of period $3,501,145 $3,175,010
--------------- -------------
--------------- -------------
Supplemental disclosures of cash flow information:
JUNE 29, 1996 JULY 1, 1995
--------------- -------------
Interest $16,599 $21,871
Income taxes $676,088 $840,774
The accompanying notes are an integral part of the financial statements
3
DECORATOR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWENTY-SIX WEEKS ENDED JUNE 29, 1996 AND JULY 1, 1995
(UNAUDITED)
NOTE 1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present
fairly the Company's financial position as of June 29, 1996, the
changes therein for the twenty-six week period then ended and the
results of operations for the thirteen week periods ended June 29,
1996 and July 1, 1995.
NOTE 2. The consolidated 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 generally accepted
accounting principles. For additional information, reference is made
to the Company's annual report on Form 10-K for the year ended
December 30, 1995. The results of operations for the twenty-six week
periods ended June 29, 1996 and July 1, 1995 are not necessarily
indicative of operating results for the full year.
NOTE 3. INVENTORIES
Inventories at June 29, 1996 and December 30, 1995 consisted of the
following:
June 29, 1996 December 30, 1995
------------- -----------------
Raw material and
Supplies $2,798,716 $2,814,309
In process and
Finished Goods 212,279 191,074
--------- ----------
$3,010,995 $3,005,383
--------- ----------
--------- ----------
NOTE 4. EARNINGS PER SHARE
The excess of shares assumed to be issued under the stock option plans
over shares that could be purchased with the proceeds based on the
higher average or period ending market prices, was sufficient to cause
fully diluted earnings per share to be different from primary earnings
per share as shown in the consolidated statement of income.
4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
The Company's financial condition, as measured by the following ratios,
continues to be strong at the end of the Second Quarter.
June 29, 1996 December 30, 1995
------------- -----------------
Current Ratio 2:44 2:54
Quick Ratio 1:87 1:87
LT Debt to Total Capital 4.36% 5.14%
Working Capital $7,668,506 $6,925,352
Cash and Short-Term Investments total $5,922,902. These cash balances and
borrowing capacity keep the company well-positioned to take advantage of
internal growth or acquisition opportunities that might arise.
RESULTS OF OPERATIONS:
The following table shows the percentage relationship to net sales of certain
items in the Company's statement of income:
Second First Second First
Quarter Half Quarter Half
1996 1996 1995 1995
---- ---- ---- ----
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 73.1 74.1 74.4 73.7
Selling and administrative 14.0 14.3 14.5 14.9
Interest and investment income (0.4) (0.5) (1.3) (1.5)
Interest expense .1 .1 .1 .2
Income taxes 4.6 4.3 4.6 4.7
Net income 8.6 7.7 7.7 8.0
THIRTEEN-WEEK PERIOD ENDED JUNE 29, 1996, (SECOND QUARTER 1996) COMPARED TO
THIRTEEN-WEEK PERIOD ENDED JULY 1, 1995,(SECOND QUARTER 1995)
Net sales for the second quarter were $10,540,139 compared with $8,749,072 for
the same period of 1995. This quarters net sales were the highest quarterly
sales ever achieved by the Company. Increases in net sales were experienced in
all markets served by the Company.
Cost of products sold decreased to 73.1% in the second quarter compared to 74.4%
a year ago. This improvement is attributable to improved efficiencies and
higher volumes.
The tax rate for the second quarter of 1996 was 34.8% compared to 37.1% for the
second quarter of 1995. The reduction in the rate is due to the recognition of
non-taxable insurance proceeds on the former chairman of the Company.
All of the foregoing resulted in an improved net income of $910,548, 8.6% of net
sales, for the second quarter of 1996 versus $677,283, 7.7%, for the same period
of 1995.
5
TWENTY-SIX WEEK PERIOD ENDED JUNE 29, 1996, (FIRST HALF 1996) COMPARED TO
TWENTY-SIX WEEK PERIOD ENDED JULY 1, 1995, (FIRST HALF 1995)
For the six months ended June 29, 1996, net sales were $19,988,882 compared
With $17,024,503 in the same period in the prior year. Net income was
$1,533,274, or 66 cents per share (primary), compared to $1,357,728, or 52
Cents per share (primary) in the same period of 1995. The First Half results
achieved record sales, record net income and record earnings per share for
The Company.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
None
(b) No reports on Form 8-K were filed by the Company
During the fiscal quarter ended June 29, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
DECORATOR INDUSTRIES, INC.
(REGISTRANT)
By: \s\ William Bassett
-------------------------
William Bassett, President
By: \s\ Michael K. Solomon
-------------------------
Date: August 12, 1996 Michael K. Solomon, Treasurer
6