================================================================================
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 March 31, 2001
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.
- --------------------------------------------------------------------------------
(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, 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 X No
---- -----
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 11, 2001
------------------- ---------------------------
Common Stock, Par Value $.20 Per Share 2,797,616
================================================================================
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DECORATOR INDUSTRIES, INC.
BALANCE SHEET
March 31, 2001 Dec. 30, 2000
-------------- -------------
(UNAUDITED)
ASSETS
------
Current Assets:
Cash and Cash Equivalents $ 313,027 $ 307,819
Accounts Receivable, less allowance for
doubtful accounts ($181,395 and $144,395) 3,609,170 3,494,676
Inventories 4,629,860 5,203,240
Other Current Assets 1,203,744 947,134
----------- -----------
Total Current Assets 9,755,801 9,952,869
----------- -----------
Property and Equipment:
Land, Buildings & Improvements 4,149,687 4,144,229
Machinery, Equipment, Furniture and Fixtures 5,333,245 5,326,181
----------- -----------
Total Property and Equipment 9,482,932 9,470,410
Less: Accumulated Depreciation and Amortization 3,771,145 3,659,764
----------- -----------
Net Property and Equipment 5,711,787 5,810,646
----------- -----------
Goodwill, less accumulated
amortization of $1,270,127 and $1,243,980 2,810,158 2,836,306
Other Assets 487,085 255,566
----------- -----------
Total Assets $18,764,831 $18,855,387
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current Liabilities:
Accounts Payable $ 2,659,936 $ 2,393,004
Current Maturities of Long-term Debt 105,094 104,640
Accrued Expenses:
Compensation 570,132 789,681
Other 1,527,392 1,510,897
----------- -----------
Total Current Liabilities 4,862,554 4,798,222
----------- -----------
Long-Term Debt 1,683,326 1,709,686
Deferred Income Taxes 382,000 368,000
----------- -----------
Total Liabilities 6,927,880 6,875,908
----------- -----------
Stockholders' Equity
Common stock $.20 par value: Authorized shares, 10,000,000;
Issued shares, 4,444,997 888,999 888,999
Paid-in Capital 1,434,692 1,441,655
Retained Earnings 17,624,932 17,777,461
----------- -----------
19,948,623 20,108,115
Less: Treasury stock, at cost: 1,649,989 and 1,653,437 shares 8,111,672 8,128,636
----------- -----------
Total Stockholders' Equity 11,836,951 11,979,479
----------- -----------
Total Liabilities and Stockholders' Equity $18,764,831 $18,855,387
=========== ===========
The accompanying notes are an integral part of the financial statements.
1
DECORATOR INDUSTRIES, INC.
STATEMENT OF EARNINGS
(UNAUDITED)
FOR THIRTEEN WEEKS ENDED:
----------------------------------------------------------
March 31, 2001 April 1, 2000
---------------------- -----------------------
Net Sales $8,052,955 100.00% $12,443,014 100.00%
Cost of Products Sold 6,587,384 81.80% 9,768,058 78.50%
---------- -----------
Gross Profit 1,465,571 18.20% 2,674,956 21.50%
Selling and Administrative Expenses 1,539,739 19.12% 1,687,704 13.56%
----------- -----------
Operating Income (Loss) (74,168) -0.92% 987,252 7.93%
Other Income (Expense):
Interest and Investment Income 3,917 0.05% 18,637 0.15%
Interest Expense (23,483) -0.29% (20,180) -0.16%
---------- -----------
Earnings (Loss) Before Income Taxes (93,734) -1.16% 985,709 7.92%
Provision for Income Taxes (Benefit) (25,000) -0.31% 370,000 2.97%
---------- -----------
Earnings (Loss) from Continuing
operations (68,734) -0.85% 615,709 4.95%
Discontinued operations:
- ------------------------
Loss from operations, net of income tax
benefit of $(22,000) -- (34,764) -0.28%
---------- -----------
Net Earnings (Loss) ($68,734) -0.85% $ 580,945 4.67%
========== ===========
Earnings Per Share:
Continuing Operations $(0.02) $0.19
====== =====
Discontinued Operations $0.00 $ (0.01)
===== =======
Basic $(0.02) $0.18
====== =====
Diluted $(0.02) $0.18
====== =====
Weighted-Average Number of Shares Outstanding:
Basic 2,793,772 3,180,033
Diluted 2,825,352 3,222,562
The accompanying notes are an integral part of the financial statements.
2
DECORATOR INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THIRTEEN WEEKS ENDED:
March 31, 2001 April 1, 2000
-------------- -------------
Cash Flows From Operating Activities:
Net Earnings (Loss) ($68,734) $580,945
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 189,274 187,234
Provision for Losses on Accounts Receivable 37,000 26,000
Deferred Taxes 47,000 11,000
(Gain) Loss on Disposal of Assets 42 (400)
(Increase) Decrease from Changes in Short-term Investments -- 830,908
(Increase) Decrease from Changes in Accounts Receivable (151,494) (1,193,398)
(Increase) Decrease from Changes in Inventory 573,380 (312,421)
(Increase) Decrease from Changes in Prepaid Expenses (289,610) (77,051)
(Increase) Decrease from Changes in Other Assets (231,519) (103,930)
Increase (Decrease) from Changes in Accounts Payable 266,932 1,079,516
Increase (Decrease) from Changes in Accrued Expenses (203,054) 49,366
------------- ------------
Net Cash Provided by Operating Activities 169,217 1,077,769
------------- ------------
Cash Flows From Investing Activities:
Capital Expenditures (64,309) (130,111)
Proceeds from Property Dispositions -- 400
------------- ------------
Net Cash Provided by (Used in) Investing Activities (64,309) (129,711)
------------- ------------
Cash Flows From Financing Activities:
Long-term Debt Payments (25,906) (29,369)
Dividend Payments (83,794) (223,345)
Proceeds from Exercise of Stock Options -- 21,460
Issuance of Stock for Directors' Compensation 10,000 10,000
Purchase of Common Stock for Treasury -- (238,219)
------------- ------------
Net Cash Used in Financing Activities (99,700) (459,473)
Net Increase (Decrease) in Cash and Cash Equivalents 5,208 488,585
Cash and Cash Equivalents at Beginning of Year 307,819 484,328
------------- ------------
Cash and Cash Equivalents at End of Period $ 313,027 $ 972,913
============= ============
Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Interest $ 21,493 $ 9,651
Income Taxes $ 33,217 $ 26,413
The accompanying notes are an integral part of the financial statements.
3
DECORATOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED MARCH 31, 2001 AND APRIL 1, 2000
(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 March
31, 2001, the changes therein for the thirteen week period
then ended and the results of operations for the thirteen week
periods ended March 31, 2001 and April 1, 2000.
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 December 30, 2000. The results of
operations for the thirteen week periods ended March 31, 2001
and April 1, 2000 are not necessarily indicative of operating
results for the full year.
NOTE 3. INVENTORIES
-----------
Inventories at March 31, 2001 and December 30, 2000 consisted
of the following:
March 31, 2001 December 30, 2000
-------------- -----------------
Raw Material
and Supplies $ 4,253,910 $ 4,876,287
In Process and
Finished Goods 375,950 326,953
----------- -----------
Total Inventory $ 4,629,860 $ 5,203,240
=========== ===========
NOTE 4. EARNINGS PER SHARE
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.
March 31, 2001 April 1, 2000
-------------- -------------
Numerator:
Net earnings (loss) ($68,734) $ $580,945
======== ==========
Denominator:
Weighted-average number
of common shares outstanding 2,793,772 3,180,033
Dilutive effect of
stock options on net income 31,580 42,529
--------- ----------
2,825,352 3,222,562
========= ==========
Diluted earnings per share: $(0.02) $0.18
======= =====
4
DECORATOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THIRTEEN WEEKS ENDED MARCH 31, 2001 AND APRIL 1, 2000
(UNAUDITED)
NOTE 5. DISCONTINUED OPERATIONS
-----------------------
During the second quarter of 2000, the Company adopted a plan
to dispose of its contract sewing operations for the
hospitality industry through liquidation. At July 1, 2000, the
net assets of this operation consisted primarily of goodwill
($565,481), inventories, machinery and equipment, and trade
receivables. This decision resulted in an after-tax loss of
$422,000 for disposal of this operation. Included in the loss
on disposal was a pre-tax provision of $60,000 for estimated
operating losses during the phase-out period.
In the fourth quarter of 2000, the Company decided to
discontinue the manufacturing of furniture for sale to the
recreational vehicle and hospitality industries. At December
30, 2000, the assets of this operation consisted primarily of
inventories, equipment and trade receivables. This decision
resulted in an after-tax loss of $329,000 for disposal of this
operation. Included in the loss on disposal is a pre-tax
provision of $160,000 for estimated operating losses during
the phase-out period.
As of this date, management feels the reserves set up for
discontinued operations are adequate.
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 2001.
March 31, 2001 December 30, 2000
-------------- -----------------
Current Ratio 2:01 2:07
Quick Ratio 1.05 0:99
LT Debt to Total Capital 12.45% 12.49%
Working Capital $4,893,247 $5,154,647
Days sales outstanding in accounts receivable were 38.9 days at March 31, 2001
compared to 32.4 days at April 1, 2000, and accounts receivable increased by
more than 3%. Inventories decreased by 11% during the quarter.
Management does not foresee any events which will adversely affect its liquidity
during 2001. At the quarter end, the Company had no borrowings against its
$5,000,000 revolving line of credit. With the available borrowing capacity and
the Company's cash balances, the financial condition is more than adequate to
finance internal growth and the acquisitions of businesses.
RESULTS OF OPERATIONS
The following tables show the percentage relationship to net sales of certain
items in the Company's Statement of Earnings:
First First
Quarter Quarter
2001 2000
---- ----
Earnings Ratios
Net sales 100.0% 100.0%
Cost of products sold 81.8 78.5
Selling and administrative 19.1 13.5
Interest and investment income (0.1) (0.2)
Interest expense 0.3 0.2
Income taxes (benefit) (0.3) 3.0
Discontinued operations --- (0.3)
Net earnings (loss) (0.8) 4.7
6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations. (Continued)
--------------
Thirteen Week Period Ended March 31, 2001, (First Quarter 2001) compared to
Thirteen Week Period Ended April 1, 2000, (First Quarter 2000)
- -------------------------------------------------------------
Net sales for the First Quarter 2001 were $8,052,955, compared to $12,443,014
for the same period in the previous year, a 35.3% decrease. The Company
experienced sales declines in each of the markets it serves. The manufactured
housing industry is reporting a 40% decrease in sales over last year. At the
same time, the recreational vehicle industry is reporting a 25% decline in
factory shipment from a year earlier.
Cost of products sold increased to 81.8% in the First Quarter 2001 compared to
78.5% a year ago. This increase is largely attributable to fixed expenses being
absorbed over a smaller sales volume.
Selling and administrative expenses as a percentage of sales were 19.1% in the
First Quarter 2001 versus 13.5% in the First Quarter 2000, even though the
overall dollars decreased by $147,965. This was caused by the fixed expenses
being absorbed over reduced sales volume.
Interest and investment income was $14,720 less in the First Quarter 2001 than
the amount earned in the First Quarter 2000 because of lower investable
balances.
A net loss of $68,734 was reported in the First Quarter of 2001 compared to
$580,945 of net earnings in the First Quarter of 2000. The loss can be
attributed to the reduced sales volume.
7
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 quarterly period
ended March 31, 2001.
8
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 11, 2001 By: /s/ William A. Bassett
------------ ------------------------------------
William A. Bassett, President
Date: May 11, 2001 By: /s/ Michael K. Solomon
------------ ------------------------------------
Michael K. Solomon, Treasurer
9