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 March 29, 1997
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 1-7753
DECORATOR INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1001433
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10011 PINES BLVD., SUITE 201, PEMBROKE PINES, FL 33024
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(Address of principal executive offices) (zip code)
954-436-8909
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(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 .
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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 APRIL 30, 1997
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Common Stock, $.20 par value 2,377,663 shares*
*Includes 29,533 shares issuable upon surrender of the
outstanding $.10 par common stock.
PART I - FINANCIAL INFORMATION
DECORATOR INDUSTRIES, INC.
BALANCE SHEET
MARCH 29, 1997 Dec. 28, 1996
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ASSETS (UNAUDITED)
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CURRENT ASSETS:
Cash and Cash Equivalents $ 4,642,815 $ 4,714,356
Short-term Investments 2,584,946 2,539,613
Accounts Receivable, less allowance for
doubtful accounts ($241,746 and $232,302) 3,892,110 2,972,572
Inventories 3,309,346 3,083,004
Other Current Assets 478,639 333,269
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TOTAL CURRENT ASSETS 14,907,856 13,642,814
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PROPERTY AND EQUIPMENT:
Land, Buildings & Improvements 2,387,622 2,355,013
Machinery, Equipment, Furniture & Fixtures 3,394,679 3,042,968
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TOTAL PROPERTY & EQUIPMENT 5,782,301 5,397,981
Less: Accumulated Depreciation and Amortization 2,347,469 2,249,848
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NET PROPERTY & EQUIPMENT 3,434,832 3,148,133
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GOODWILL, less accumulated
amortization of $888,922 and $874,225 2,648,449 1,402,818
OTHER ASSETS 183,905 200,592
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TOTAL ASSETS $21,175,042 $18,394,357
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts Payable $ 2,952,199 $ 2,624,552
Current Maturities of Long-term Debt 41,692 41,685
Accrued Expenses:
Income Taxes 442,352 63,397
Compensation 675,320 1,443,921
Other 2,766,026 465,423
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TOTAL CURRENT LIABILITIES 6,877,589 4,638,978
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LONG-TERM DEBT 539,192 549,433
DEFERRED INCOME TAXES 195,000 195,000
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TOTAL LIABILITIES 7,611,781 5,383,411
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STOCKHOLDERS' EQUITY:
Common Stock $.20 par value: Authorized shares,
5,000,000; Issued shares, 2,744,829 and 2,725,462 547,791 545,094
Paid-in Capital 1,559,467 1,546,152
Retained Earnings 13,014,928 12,478,625
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15,122,186 14,569,871
Less: Treasury Stock, at cost: 369,087 shares 1,558,925 1,558,925
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TOTAL STOCKHOLDERS' EQUITY 13,563,261 13,010,946
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $21,175,042 $18,394,357
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The accompanying notes are an integral part of the financial statements.
1
DECORATOR INDUSTRIES, INC.
STATEMENT OF EARNINGS
(UNAUDITED)
FOR THIRTEEN WEEKS ENDED:
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MARCH 29, 1997 MARCH 30, 1996
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NET SALES $9,386,543 100.00% $9,439,498 100.00%
COST OF PRODUCTS SOLD 6,922,154 73.75% 7,102,934 75.25%
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GROSS PROFIT 2,464,389 26.25% 2,336,564 24.75%
SELLING AND ADMINISTRATIVE
EXPENSES 1,429,942 15.23% 1,390,875 14.73%
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OPERATIONING INCOME 1,034,447 11.02% 945,689 10.02%
OTHER INCOME (EXPENSE):
Interest and Dividend Income 92,162 0.98% 57,787 0.61%
Interest Expense (11,003) -0.12% (11,750) -0.12%
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EARNINGS BEFORE INCOME TAXES 1,115,606 11.89% 991,726 10.51%
PROVISION FOR INCOME TAXES 413,000 4.40% 369,000 3.91%
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NET INCOME $702,606 7.49% $622,726 6.60%
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PRIMARY EARNINGS PER SHARE $0.30 $0.27 *
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FULLY DILUTED EARNINGS PER SHARE $0.28 $0.25 *
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Average Number of Shares Outstanding:
Primary 2,373,213 2,307,885 *
Fully Diluted 2,556,069 2,482,231 *
*Restated to reflect the four-for-three stock split effective June 17, 1996.
The accompanying notes are an integral part of the financial statements.
2
DECORATOR INDUSTRIES, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
FOR 13 WEEKS ENDED:
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MARCH 29, 1997 MARCH 30, 1996
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CASH FLOWS FROM OPERATING ACTIVITES:
Net Income $702,606 $622,726
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 112,576 99,276
Provision for Losses on Accounts Receivable 5,000 12,500
(Gain) Loss on Disposal of Assets 1,951
Increase (Decrease) from Changes In:
Accounts Receivable (492,373) (888,772)
Inventory 264,065 81,872
Short-term Investments (45,333) (2,394,707)
Prepaid Expenses (145,370) (25,172)
Other Assets (3,313) (268,647)
Accounts Payable 327,647 574,356
Accrued Expenses (265,358) (16,741)
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NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES 460,14 (2,201,358)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (111,664) (77,620)
Proceeds from Property Dispositions 500 860
Note Receivable 20,000 20,000
Acquisition (280,000)
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NET CASH USED FOR INVESTING ACTIVITIES (371,164) (56,760)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term Debt Payments (10,234) (8,703)
Dividend Payments (166,302) (120,280)
Proceeds from Exercise of Stock Options 16,012 42,000
Purchase of Common Stock for Treasury (748,837)
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NET CASH USED FOR FINANCING ACTIVITIES (160,524) (835,820)
NET DECREASE IN CASH AND CASH EQUIVALENTS (71,541) (3,093,938)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 4,714,356 5,269,772
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $4,642,815 $2,175,834
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SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash Paid for:
Interest $11,003 $8,787
Income Taxes $34,045 $56,472
Cash Flows from Acquisition:
Purchase Price $2,455,783
Less: Deferred Portion of Purchase Price (2,175,783)
Cash Used for Acquisition $280,000
The accompanying notes are an integral part of the financial statements.
3
DECORATOR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED MARCH 29, 1997 AND MARCH 30, 1996
(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 March 29, 1997, the
changes therein for the thirteen week period then ended and the
results of operations forthe thirteen week periods ended March 29,
1997 and March 30, 1996.
NOTE 2. The consolidated financial statements included in the Form 10-Q
arepresented 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 28, 1996. The results of operations for the thirteen week
periods ended March 29, 1997 and March 30, 1996 are not necessarily
indicative of operating results for the full year.
NOTE 3. INVENTORIES
Inventories at March 29, 1997 and December 28, 1996 consisted of the
following:
MARCH 29, 1997 DECEMBER 28, 1996
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Raw material and
Supplies $3,121,611 $2,854,066
In process and
Finished Goods 187,735 228,938
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$3,309,346 $3,083,004
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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.
NOTE 5. ACQUISITIONS
The Company acquired, effective March 15, 1997, the business and certain
assets of Specialty Window Coverings Corp., an Elkhart, Indiana based
manufacturer of pleated shades for the recreational vehicle market. The purchase
price was $2,455,783 in cash plus conditional payments, based on earnings, of up
to $2 million over the succeeding two years. The Company
4
DECORATOR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THIRTEEN WEEKS ENDED MARCH 29, 1997 AND MARCH 30, 1996
(UNAUDITED)
assumed no liabilities. Specialty will continue to operate from its
existing facilities, which are being expanded from 20,000 to 35,000
square feet and which are leased from the former owners of Specialty.
Specialty had net sales of approximately $5 million in 1996. The
Company recognized goodwill of approximately $1.3 million in
connection with the acquisition.
On March 4, 1997, the Company further expanded its product line to
include furniture and cushions for the recreational vehicle market by
having purchased the assets of Action Design Interiors, also based in
Elkhart, Indiana.
5
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 First Quarter.
MARCH 29, 1997 DECEMBER 28, 1996
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Current Ratio 2:70 * 2:94
Quick Ratio 2:00 * 2:28
LT Debt to Total Capital 3.62% 4.03%
Working Capital $8,030,267 $9,003,836
*Adjusted for the elimination of the acquisition liability.
Cash and Short-Term Investments totaled $7,227,761 at March 29, 1997.
Approximately $2,150,000 of this cash balance has subsequently been used to pay
the acquisition liability included in Other Liabilities on the quarter-end
Balance Sheet. The remaining 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 tables show the percentage relationship to net sales of certain
items in the Company's Statement of Earnings and net sales dollars by market:
FIRST FIRST
QUARTER QUARTER
1997 1996
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EARNINGS RATIOS
Net Sales 100.0% 100.0%
Cost of products sold 73.7 75.2
Selling and administrative 15.2 14.7
Interest and investment income (1.0) (.6)
Interest expense .1 .1
Income taxes 4.4 3.9
Net income 7.5 6.6
NET SALES BY MARKET
Manufactured housing $4,573 $5,246
Recreational vehicles 2,668 2,164
Hospitality 2,146 2,029
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Net sales - total $9,387 $9,439
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6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Thirteen-Week Period Ended March 29, 1997, (First Quarter 1997) compared to
Thirteen-Week Period Ended March 30, 1996, (First Quarter 1996)
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Net sales for the First Quarter were $9,386,543, compared to $9,439,498 for the
same period the previous year, a .5% decrease. The reduction in sales to the
Manufactured Housing Industry were offset by increases to the Recreational
Vehicle and Hospitality markets.
Cost of products sold decreased to 73.7% in the First Quarter compared to 75.2%
a year ago. The improvement is the result of reduced material costs.
Net income in the First Quarter was $702,606 or 30 cents per share (primary),
compared with $622,726 or 27 cents per share (primary), in the same period a
year ago. The results reflect a 13% and 11% increase respectfully.
7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS
27A - Financial data schedule, filed herewith.
(b) No reports on Form 8-K were filed by the Company
during the fiscal quarter ended March 29, 1997.
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
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William Bassett, President
By: /S/ MICHAEL K.SOLOMON
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Date: May 9, 1997 Michael K. Solomon, Treasurer