UNITED STATES
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 quarterly period ended April 1, 2000
OR
[ ] 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, Florida 33024
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(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 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.
Title of each class Outstanding at May 1, 2000
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Common Stock, Par Value $.20 Per Share 3,166,139
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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DECORATOR INDUSTRIES, INC.
BALANCE SHEET
April 1, 2000 Jan. 1, 2000
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ASSETS (UNAUDITED)
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Current Assets:
Cash and Cash Equivalents $ 972,913 $ 484,328
Short-term Investments 624,888 1,455,796
Accounts Receivable, less allowance for
doubtful accounts ($189,789 and $158,996) 4,892,954 3,725,556
Inventories 6,051,724 5,739,303
Other Current Assets 457,319 372,258
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Total Current Assets 12,999,798 11,777,241
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Property and Equipment:
Land, Buildings & Improvements 4,130,751 4,123,189
Machinery, Equipment, Furniture and Fixtures 4,913,026 4,808,280
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Total Property and Equipment 2,043,777 8,931,469
Less: Accumulated Depreciation and Amortization 3,243,500 3,104,989
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Net Property and Equipment 5,800,277 5,826,480
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Goodwill, less accumulated
amortization of $1,220,799 and $1,189,871 3,618,037 3,648,965
Other Assets 516,767 412,837
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Total Assets $ 22,934,879 $ 21,665,523
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LIABILITIES & STOCKHOLDERS' EQUITY
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Current Liabilities:
Accounts Payable $ 4,180,197 $ 3,100,681
Current Maturities of Long-term Debt 102,575 103,871
Accrued Expenses:
Income Taxes 228,213 --
Compensation 817,041 1,278,660
Other 929,946 647,173
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Total Current Liabilities 6,257,972 5,130,385
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Long-Term Debt 1,786,096 1,814,169
Deferred Income Taxes 375,000 356,000
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Total Liabilities 8,419,068 7,300,554
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Stockholders' Equity
Common stock $.20 par value: Authorized shares, 10,000,000;
Issued shares, 4,444,997 and 4,408,831 888,999 881,766
Paid-in Capital 1,441,676 1,427,788
Retained Earnings 18,725,758 18,368,158
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21,056,433 20,677,712
Less: Treasury stock, at cost: 1,264,587 and 1,219,801 shares 6,540,622 6,312,743
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Total Stockholders' Equity 14,515,811 14,364,969
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Total Liabilities and Stockholders' Equity $ 22,934,879 $ 21,665,523
============ ============
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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April 1, 2000 April 3, 1999
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Net Sales $ 13,391,582 100.00% $ 13,211,871 100.00%
Cost of Products Sold 10,688,670 79.82% 10,314,840 78.07%
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Gross Profit 2,702,912 20.18% 2,897,031 21.93%
Selling and Administrative Expenses 1,772,424 13.23% 1,781,393 13.48%
------------ ------ ------------ ------
Operating Income 930,488 6.95% 1,115,638 8.45%
Other Income (Expense):
Interest and Investment Income 18,637 0.14% 17,906 0.13%
Interest Expense (20,180) -0.15% (4,528) -0.03%
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Earnings Before Income Taxes 928,945 6.94% 1,129,016 8.55%
Provision for Income Taxes 348,000 2.60% 426,000 3.23%
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Net Income $ 580,945 4.34% $ 703,016 5.32%
============ ======= ============ ======
Earnings Per Share:
Basic $ 0.18 $ 0.20
============ ============
Diluted $ 0.18 $ 0.19
============ ============
Weighted-Average Number of Shares Outstanding:
Basic 3,180,033 3,526,904
Diluted 3,222,562 3,694,190
The accompanying notes are an integral part of the financial statements.
2
DECORATOR INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THIRTEEN WEEKS ENDED:
April 1, 2000 April 3, 1999
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Cash Flows From Operating Activities:
Net Income $ 580,945 $ 703,016
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 187,234 156,833
Provision for Losses on Accounts Receivable 26,000 13,000
Deferred Taxes 11,000 --
(Gain) Loss on Disposal of Assets (400) 3,833
(Increase) Decrease from Changes in Accounts Receivable (1,193,398) (878,122)
(Increase) Decrease from Changes in Inventory (312,421) 712,275
(Increase) Decrease from Changes in Prepaid Expenses (77,051) 8,245
(Increase) Decrease from Changes in Other Assets (103,930) 358,922
Increase (Decrease) from Changes in Accounts Payable 1,079,516 732,528
Increase (Decrease) from Changes in Accrued Expenses 49,366 (291,036)
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Net Cash Provided by Operating Activities 246,861 1,519,494
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Cash Flows From Investing Activities:
Capital Expenditures (130,111) (1,391,086)
Proceeds from Property Dispositions 400 --
Short-term Investments 830,908 (1,001,714)
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Net Cash Provided by (Used in) Investing Activities 701,197 (2,392,800)
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Cash Flows From Financing Activities:
Long-term Debt Payments (29,369) (12,056)
Proceeds from Debt -- 1,222,965
Dividend Payments (223,345) (245,772)
Proceeds from Exercise of Stock Options 21,460 18,833
Issuance of Stock for Directors' Compensation 10,000 12,500
Purchase of Common Stock for Treasury (238,219) (1,253,200)
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Net Cash Used in Financing Activities (459,473) (256,730)
Net Increase (Decrease) in Cash and Cash Equivalents 488,585 (1,130,036)
Cash and Cash Equivalents at Beginning of Year 484,328 2,633,999
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Cash and Cash Equivalents at End of Period $ 972,913 $ 1,503,963
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Interest $ 9,651 $ 6,334
Income Taxes $ 26,413 $ 26,147
The accompanying notes are an integral part of the financial statements.
3
DECORATOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED APRIL 1, 2000 AND APRIL 3, 1999
(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 April 1,
2000, the changes therein for the thirteen week period then
ended and the results of operations for the thirteen week
periods ended April 1, 2000 and April 3, 1999.
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 generally
accepted accounting principles. For additional information,
reference is made to the Company's annual report on Form 10-K
for the year ended January 1, 2000. The results of operations
for the thirteen week periods ended April 1, 2000 and April 3,
1999 are not necessarily indicative of operating results for
the full year.
NOTE 3. INVENTORIES
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Inventories at April 1, 2000 and January 1, 2000 consisted of
the following:
April 1, 2000 January 1, 2000
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Raw Material
and Supplies $ 5,533,926 $ 5,363,747
In Process and
Finished Goods 517,798 375,556
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Total Inventory $ 6,051,724 $ 5,739,303
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NOTE 4. EARNINGS PER SHARE
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Basic earnings per share is computed by dividing net income by
weighted-average number of shares outstanding. Diluted
earnings per share includes the dilutive effect of stock
options. In accordance with SFAS No. 128, the following is a
reconciliation of the numerators and denominators of the basic
and diluted EPS computations.
April 1, 2000 April 3, 1999
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Numerator:
Net income $ 580,945 $ 703,016
========== ==========
Denominator:
Weighted-average number of
common shares outstanding 3,180,033 3,526,904
Dilutive effect of
stock options on net income 42,529 167,286
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3,222,562 3,694,190
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Diluted earnings per share: $ 0.18 $ 0.19
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4
DECORATOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED APRIL 1, 2000 AND APRIL 3, 1999
(UNAUDITED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations.
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FINANCIAL CONDITION
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The Company's financial condition, as measured by the following ratios,
continues to be strong at the end of the First Quarter 2000.
April 1, 2000 January 1, 2000
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Current Ratio 2:08 2:30
Quick Ratio 1:11 1:18
LT Debt to Total Capital 10.96% 11.21%
Working Capital $6,741,826 $6,646,856
Days sales outstanding in accounts receivable were 33.0 days at April 1, 2000
compared to 34.2 days at April 3, 1999, Although accounts receivable increased
by more than 31%. Inventories increased by 5% during the quarter. A use of
working capital was for the purchase of Common Stock for Treasury ($238,219)
during the quarter.
Cash and Short-Term Investments totaled $1,597,801 at April 1, 2000. Management
does not foresee any events which will adversely affect its liquidity during
2000. On April 19,2000 the Company signed an agreement for a $5,000,000
revolving line of credit. With this credit line in place and the Company's cash
balances the financial condition is more than adequate to finance internal
growth and for the acquisitions of businesses.
RESULTS OF OPERATIONS
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The following tables show the percentage relationship to net sales of certain
items in the Company's Statement of Earnings:
First First
Quarter Quarter
2000 1999
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Earnings Ratios
---------------
Net sales 100.0% 100.0%
Cost of products sold 79.8 78.1
Selling and administrative 13.2 13.5
Interest and investment income (0.1) (0.1)
Interest expense 0.2 0.0
Income taxes 2.6 3.2
Net income 4.3 5.3
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DECORATOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED APRIL 1, 2000 AND APRIL 3, 1999
(UNAUDITED)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations. (Continued)
--------------
Thirteen Week Period Ended April 1, 2000, (First Quarter 2000) compared to
Thirteen Week Period Ended April 3, 1999, (First Quarter 1999)
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Net sales for the First Quarter 2000 were $13,391,582, compared to $13,211,871
for the same period in the previous year, a 1.4% increase. This increase was the
result of growth in sales to the recreational vehicle and hospitality markets.
The Company's sales to the manufactured housing market continue to be adversely
affected by a decline in manufactured housing production, caused by an excess
dealer inventory of manufactured homes.
Cost of products sold increased to 79.8% in the First Quarter 2000 compared to
78.1% a year ago. This increase is largely attributable to a change in the
product mix including the increased sales to recreational vehicle and
hospitality markets. Additionally, fixed expenses for manufactured housing sales
were absorbed over a smaller sales volume.
Selling and administrative expenses were $1,772,424 in the First Quarter 2000
versus $1,781,393 in the First Quarter 1999.
Interest and investment income was $731 more in the First Quarter 2000 than the
amount earned in the First Quarter 1999.
Net income decreased to $580,945 from $703,016 for the same period a year ago
but improved from $446,317 achieved in the prior quarter. Diluted earnings per
share decreased to 18 cents per share from 19 cents in the first quarter of last
year.
6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits:
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10Y - Revolving line of credit agreement with
Comerica Bank dated April 19, 2000, filed
herewith.
27M - Financial data schedule, filed herewith.
(b) No reports on Form 8-K were filed by the Company during the
quarterly period ended April 1, 2000.
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: May 5, 2000 By: /s/ William A. Bassett
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William A. Bassett, President
Date: May 5, 2000 By: /s/ Michael K. Solomon
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Michael K. Solomon, Treasurer
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