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 September 28, 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 November 6, 1996
- ----- -------------------------------
Common Stock, $.20 par value 2,358,855 shares*
*Includes 29,831 shares issuable upon surrender of the
outstanding $.10 par common stock.
PART 1 - FINANCIAL INFORMATION
DECORATOR INDUSTRIES, INC.
BALANCE SHEET
September 28, 1996 December 30, 1995
------------------ -----------------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and Cash Equivalents $3,924,356 $5,269,772
Short-term Investments 2,459,097 14,607
Accounts Receivable 3,446,028 2,776,039
Note Receivable 80,000 80,000
Inventories 3,116,993 3,005,383
Prepaid Expenses 194,973 126,373
Prepaid and Deferred Income Taxes 159,000 159,000
----------- -----------
Total Current Assets 13,380,447 11,431,174
PROPERTY & EQUIPMENT 5,317,909 5,076,864
Less: Accumulated Depreciation
and Amortization 2,156,504 1,988,557
----------- -----------
Net Value of Property and Equipment 3,161,405 3,088,307
EXCESS OF COST OVER NET ASSETS ACQUIRED acqu 1,417,515 1,461,605
NOTE RECEIVABLE 80,000 140,000
OTHER ASSETS 167,348 294,573
----------- -----------
TOTAL ASSETS $18,206,715 $16,415,659
----------- -----------
----------- -----------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $3,244,104 $2,751,329
Accrued Expenses -Income Taxes 159,841 60,873
- Compensation 1,234,246 1,072,321
- Other 363,010 580,267
Current Maturities of Long-term Debt 41,419 41,032
----------- -----------
Total Current Liabilities 5,042,620 4,505,822
LONG-TERM DEBT 558,488 587,083
DEFERRED INCOME TAXES 175,000 175,000
----------- -----------
Total Liabilities 5,776,108 5,267,905
STOCKHOLDERS' EQUITY:
Common Stock 541,844 528,973
Additional Capital 1,522,403 1,692,185
Retained Earnings 11,925,285 12,228,865
----------- -----------
13,989,532 14,450,023
Less: Treasury Stock, at Cost 1,558,925 3,302,269
----------- -----------
Total Stockholders' Equity 12,430,607 11,147,754
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $18,206,715 $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 39 WEEKS ENDED:
SEPT. 28, 1996 SEPT. 30, 1995 SEPT. 28, 1996 SEPT. 30, 1995
-------------- -------------- -------------- --------------
NET SALES $9,599,140 $8,560,400 $29,581,102 $25,584,903
Cost and Expenses:
Cost of Products Sold 7,073,219 6,638,353 21,899,101 19,187,128
Selling & Administrative 1,376,076 1,160,341 4,226,635 3,698,496
Interest & Investment Income (76,912) (98,403) (179,758) (348,371)
Interest Expense 8,270 12,356 29,363 40,169
-------------- -------------- -------------- --------------
TOTAL COST AND EXPENSES 8,380,653 7,712,647 25,975,341 22,577,422
-------------- -------------- -------------- --------------
Income Before Income Taxes 1,218,487 847,753 3,605,761 3,007,481
Income Taxes 405,000 323,000 1,259,000 1,125,000
-------------- -------------- -------------- --------------
NET INCOME $813,487 $524,753 $2,346,761 $1,882,481
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
PRIMARY EARNINGS
PER SHARE(A) $0.35 $0.20* $1.01 $0.72*
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
FULLY DILUTED EARNINGS
PER SHARE(A) $0.31 $0.19* $0.93 $0.67*
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Average number of
shares outstanding:(A)
Primary 2,345,963 2,571,030* 2,326,946 2,609,159*
Fully diluted 2,543,939 2,767,058* 2,501,557 2,821,558*
*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 39 Weeks Ended:
SEPTEMBER 28, 1996 SEPTEMBER 30,1995
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $2,346,761 $1,882,481
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 304,189 283,957
Provision for losses on accounts receivable 37,500 39,500
(Gain) loss on disposal of assets (422) (2,062)
Increase (decrease) from changes in:
Accounts receivable (707,489) (802,387)
Inventory (111,610) (317,626)
Short-term investments (2,444,490) (221,125)
Prepaid expenses (68,600) (54,159)
Other assets 127,225 (45,949)
Accounts payable 492,775 661,041
Accrued expenses 43,636 (655,477)
------------------ -----------------
Net cash provided by (used in) operating activities 19,475 768,194
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (335,985) (274,926)
Proceeds from property dispositions 3,210 6,049
Note receivable 60,000 60,000
Net cash paid for acquisition 0 (432,083)
------------------ -----------------
Net cash used in investing activities (272,775) (640,960)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long term debt payments (28,208) (46,663)
Dividend payments (448,802) (386,892)
Proceeds from exercise of stock options 137,962 52,577
Stock option tax benefit 18,000 3,000
Purchase of common stock for treasury (769,829) (964,979)
Cash in lieu of fractional shares (1,239) 0
------------------ -----------------
Net cash provided by financing activities (1,092,116) (1,342,957)
Net increase in cash and cash equivalents (1,345,416) (1,215,723)
Cash and cash equivalents at beginning of year 5,269,772 4,026,035
------------------ -----------------
Cash and cash equivalents at end of period $3,924,356 $2,810,312
------------------ -----------------
------------------ -----------------
Supplemental disclosures of cash flow information:
SEPTEMBER 28, 1996 SEPTEMBER 30, 1995
------------------ -----------------
Interest $22,666 $32,348
Income taxes $1,156,532 $1,187,284
The accompanying notes are an integral part of the financial statements.
3
DECORATOR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTY-NINE WEEKS ENDED SEPTEMBER 28, 1996 AND SEPTEMBER 30, 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 September 28, 1996, the
changes therein for the thirty-nine week period then ended and the
results of operations for the thirteen week periods ended September
28, 1996 and September 30, 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 thirty-nine week
periods ended September 28, 1996 and September 30, 1995 are not
necessarily indicative of operating results for the full year.
NOTE 3. INVENTORIES
Inventories at September 28, 1996 and December 30, 1995 consisted of
the following:
September 28, 1996 December 30, 1995
------------------ -----------------
Raw material and
Supplies $2,935,531 $2,814,309
In process and
Finished Goods 181,462 191,074
------- -------
$3,116,993 $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 Third Quarter.
September 28, 1996 December 30, 1995
------------------ -----------------
Current Ratio 2:65 2:54
Quick Ratio 2:04 1:87
LT Debt to Total Capital 4.17% 5.14%
Working Capital $8,337,827 $6,925,352
Cash and Short-Term Investments total $6,383,453. 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:
First First
Third Nine Third Nine
Quarter Mos. Quarter Mos.
1996 1996 1995 1995
---- ---- ---- ----
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 73.7 74.0 77.5 75.0
Selling and administrative 14.3 14.3 13.6 14.5
Interest and investment income (0.8) (0.6) (1.1) (1.4)
Interest expense .1 .1 .1 .2
Income taxes 4.2 4.3 3.8 4.4
Net income 8.5 7.9 6.1 7.4
Thirteen-Week Period Ended September 28, 1996,(Third Quarter 1996) compared TO
THIRTEEN-WEEK PERIOD ENDED SEPTEMBER 30, 1995,(THIRD QUARTER 1995)
Net sales for the Third Quarter were $9,599,140, compared to $8,560,400 for the
same period the previous year, a 12% increase. Favorable markets have helped
contribute to these results.
Cost of products sold decreased to 73.7% in the Third Quarter compared to 77.5%
a year ago. Higher volumes and efficiency improvements were the primary reasons
for this improvement.
The Third Quarter tax rate in 1996 was 33.2% compared to 38.1% in the Third
Quarter of 1995. This reduction in the rate is due to the recognition of non-
taxable insurance proceeds on the former chairman of the Company.
Net income in the Third Quarter was $813,487 or 35 cents per share (primary),
compared with $524,753 or 20 cents per share (primary), in the same period a
year ago. The results reflect a 55% and 75% increase respectfully.
5
Thirty-nine Week Period Ended September 28, 1996, (First Nine Months
1996)compared TO THIRTY-NINE WEEK PERIOD ENDED SEPTEMBER 30, 1995 (FIRST NINE
MONTHS 1995)
For the nine months ended September 28, 1996, net sales were $29,581,102
compared with $25,584,903 in the nine months ended September 30, 1995.
Net income was $2,346,761, or $1.01 per share (primary), compared to $1,882,481,
or 72 cents per share (primary) in the same period of 1995. Net sales, net
income and earnings per share were new highs for any nine month period.
6
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 September 28, 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: November 8, 1996 Michael K. Solomon, Treasurer
7