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 30, 2002
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 3, 2002
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Common Stock, Par Value $.20 Per Share 2,785,690
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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DECORATOR INDUSTRIES, INC.
BALANCE SHEETS
March 30, 2002 Dec. 29, 2001
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ASSETS (UNAUDITED)
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CURRENT ASSETS:
Cash and Cash Equivalents $ 2,890,681 $ 2,319,568
Accounts Receivable, less allowance for
Doubtful accounts ($234,253 and $221,462) 3,532,281 3,525,377
Inventories 3,612,895 3,789,665
Other Current Assets 362,167 327,784
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TOTAL CURRENT ASSETS 10,398,024 9,962,394
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Property and Equipment:
Land, Buildings & Improvements 4,241,458 4,240,777
Machinery, Equipment, Furniture and Fixtures 5,236,491 5,212,066
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Total Property and Equipment 9,477,949 9,452,843
Less: Accumulated Depreciation and Amortization 4,197,528 4,045,789
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Net Property and Equipment 5,280,421 5,407,054
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Goodwill 2,731,717 2,731,717
Other Assets 295,411 264,351
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TOTAL ASSETS 18,705,573 18,365,516
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LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 2,406,009 $ 2,102,730
Current Maturities of Long-term Debt 110,843 105,441
Accrued Expenses:
Income taxes 149,006 39,518
Compensation 622,800 764,305
Other 772,025 876,327
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TOTAL CURRENT LIABILITIES 4,060,683 3,888,321
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Long-Term Debt 1,572,677 1,604,245
Deferred Income Taxes 436,000 409,000
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TOTAL LIABILITIES 6,069,360 5,901,566
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Stockholders' Equity Common stock $.20 par value:
Authorized shares, 10,000,000; Issued shares, 4,485,635 897,127 897,127
Paid-in Capital 1,425,501 1,425,437
Retained Earnings 18,521,485 18,300,698
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20,844,113 20,623,262
Less: Treasury stock, at cost: 1,678,516 and 1,669,948 shares 8,207,900 8,159,312
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TOTAL STOCKHOLDERS' EQUITY 12,636,213 12,463,950
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 18,705,573 18,365,516
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The accompanying notes are an integral part of the financial statements.
1
DECORATOR INDUSTRIES, INC.
STATEMENTS OF EARNINGS
(UNAUDITED)
FOR THIRTEEN WEEKS ENDED:
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March 30, 2002 March 31, 2001
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Net Sales $ 8,918,133 100.00% $ 8,052,955 100.00%
Cost of Products Sold 7,013,399 78.64% 6,587,384 81.80%
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Gross Profit 1,904,734 21.36% 1,465,571 18.20%
Selling and Administrative Expenses 1,404,517 15.75% 1,539,739 19.12%
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Operating Income (Loss) 500,217 5.61% (74,168) -0.92%
Other Income (Expense):
Interest and Investment Income 12,694 0.14% 3,917 0.05%
Interest Expense (7,770) -0.09% (23,483) -0.29%
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Earnings (Loss) Before Income Taxes 505,141 5.66% (93,734) -1.16%
Provision for Income Taxes (Benefit) 200,000 2.24% (25,000) -0.31%
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NET EARNINGS (LOSS) 305,141 3.42% (68,734) -0.85%
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EARNINGS PER SHARE:
Basic $0.11 $(0.02)
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Diluted $0.11 $(0.02)
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Weighted-Average Number of Shares Outstanding:
Basic 2,812,826 2,793,772
Diluted 2,820,594 2,825,352
The accompanying notes are an integral part of the financial statements.
2
DECORATOR INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THIRTEEN WEEKS ENDED:
March 30, 2002 March 31, 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings (Loss) $ 305,141 ($ 68,734)
Adjustments to Reconcile Net Earnings (Loss) to Net Cash
Provided by Operating Activities:
Depreciation and amortization 159,165 189,274
Provision for Losses on Accounts Receivable 12,500 37,000
Deferred Taxes 22,000 47,000
Loss on Disposal of Assets -- 42
(Increase) Decrease from Changes in Accounts Receivable (19,404) (151,494)
(Increase) Decrease from Changes in Inventories 176,770 573,380
(Increase) Decrease from Changes in Prepaid Expenses (29,383) (289,610)
(Increase) Decrease from Changes in Other Assets (31,060) (231,519)
Increase (Decrease) from Changes in Accounts Payable 303,279 266,932
Increase (Decrease) from Changes in Accrued Expenses (136,319) (203,054)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 762,689 169,217
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (32,532) (64,309)
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NET CASH USED IN INVESTING ACTIVITIES (32,532) (64,309)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term Debt Payments (26,165) (25,906)
Dividend Payments (84,355) (83,794)
Issuance of Stock for Directors' Compensation 10,000 10,000
Purchase of Common Stock for Treasury (58,524) --
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NET CASH USED IN FINANCING ACTIVITIES (159,044) (99,700)
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year 571,113 5,208
2,319,568 307,819
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,890,681 $ 313,027
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Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Interest
$ 7,873 $ 21,493
Income Taxes
$ 68,721 $ 33,217
The accompanying notes are an integral part of the financial statements.
3
DECORATOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED MARCH 30, 2002 AND MARCH 31, 2001
(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 30, 2002, the changes therein
for the thirteen week period then ended and the results of operations
for the thirteen week periods ended March 30, 2002 and March 31, 2001.
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 accounting principles generally accepted
within the United States of America. For additional information,
reference is made to the Company's annual report on Form 10-K for the
year ended December 29, 2001. The results of operations for the
thirteen week periods ended March 30, 2002 and March 31, 2001 are not
necessarily indicative of operating results for the full year.
NOTE 3. INVENTORIES
Inventories at March 30, 2002 and December 29, 2001 consisted of the
following:
March 30, 2002 December 29, 2001
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Raw Material
and Supplies $3,289,399 $3,475,824
In Process and
Finished Goods 323,496 313,841
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Total Inventory $3,612,895 $3,789,665
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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 30, 2002 March 31, 2001
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Numerator:
Net earnings (loss) $ 305,141 ($ 68,734)
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Denominator:
Weighted-average number of
common shares outstanding 2,812,826 2,793,772
Dilutive effect of
stock options on net income 7,768 31,580
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2,820,594 2,825,352
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Diluted earnings per share: $ 0.11 $ (0.02)
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4
DECORATOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
THIRTEEN WEEKS ENDED MARCH 30, 2002 AND MARCH 31, 2001
(UNAUDITED)
NOTE 5. ADOPTION OF STATEMENT 142
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In accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets", in the period of initial application and thereafter, goodwill
amortization expense is to be excluded from net earnings, as
illustrated in the following reconciliation.
March 30, 2002 March 31, 2001
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Reported net earnings (loss) $ 305,141 ($ 68,734)
Add back: goodwill amortization (after tax) -- 21,411
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Adjusted net earnings (loss) $ 305,141 ($ 47,323)
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Basic earnings per share
Reported net earnings (loss) $ 0.11 $ (0.02)
Goodwill amortization -- .01
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Adjusted net earnings (loss) $ 0.11 $ (0.01)
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Diluted earnings per share
Reported net earnings (loss) $ 0.11 $ (0.02)
Goodwill amortization -- .01
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Adjusted net earnings (loss) $ 0.11 $ (0.01)
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5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
CAUTIONARY STATEMENT: THIS QUARTERLY REPORT ON FORM 10-Q MAY CONTAIN STATEMENTS
RELATING TO FUTURE EVENTS, INCLUDING RESULTS OF OPERATIONS, THAT ARE CONSIDERED
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS REPRESENT THE
COMPANY'S EXPECTATIONS OR BELIEF AS TO FUTURE EVENTS AND, BY THEIR VERY NATURE,
ARE SUBJECT TO RISKS AND UNCERTAINTIES WHICH MAY RESULT IN ACTUAL EVENTS
DIFFERING MATERIALLY FROM THOSE ANTICIPATED. IN PARTICULAR, FUTURE OPERATING
RESULTS AND FUTURE LIQUIDITY WILL BE AFFECTED BY THE LEVEL OF DEMAND FOR
RECREATIONAL VEHICLES, MANUFACTURED HOUSING AND HOTEL/MOTEL ACCOMMODATIONS AND
MAY BE AFFECTED BY CHANGES IN ECONOMIC CONDITIONS, INTEREST RATE FLUCTUATIONS,
COMPETITIVE PRODUCTS AND PRICING PRESSURES WITHIN THE COMPANY'S MARKETS, THE
COMPANY'S ABILITY TO CONTAIN ITS MANUFACTURING COSTS AND EXPENSES, AND OTHER
FACTORS. FORWARD-LOOKING STATEMENTS BY THE COMPANY SPEAK ONLY AS OF THE DATE
MADE, AND THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE SUCH
STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE
OCCURRENCE OF UNANTICIPATED EVENTS.
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 2002.
March 30, 2002 December 29, 2001
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Current Ratio 2.56 2.56
Quick Ratio 1.67 1.59
LT Debt to Total Capital 11.07% 11.40%
Working Capital $6,337,341 $6,074,073
Days sales outstanding in accounts receivable were 35.2 days at March 30, 2002
compared to 38.9 days at March 31, 2001, and accounts receivable increased by
0.2%. Inventories decreased by 4.7% during the quarter.
Management does not foresee any events which will adversely affect its liquidity
during 2002. 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.
6
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations. (continued)
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
2002 2001
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Earnings Ratios
---------------
Net sales 100.0% 100.0%
Cost of products sold 78.6 81.8
Selling and administrative 15.8 19.1
Interest and investment income (0.1) (0.1)
Interest expense 0.1 0.3
Income taxes (benefit) 2.2 (0.3)
Net earnings (loss) 3.4 (0.8)
THIRTEEN WEEK PERIOD ENDED MARCH 30, 2002, (FIRST QUARTER 2002) COMPARED TO
THIRTEEN WEEK PERIOD ENDED MARCH 31, 2001, (FIRST QUARTER 2001)
Net sales for the First Quarter 2002 were $8,918,133, compared to $8,052,955 for
the same period in the previous year, a 10.7% increase. The Company experienced
increased sales in the recreational vehicle and manufactured housing markets,
while sales decreased in the hospitality market.
Cost of products sold decreased to 78.6% in the First Quarter 2002 compared to
81.8% a year ago. This improvement was the result of better material utilization
and improved labor efficiencies.
Selling and administrative expenses were $1,404,517 in the First Quarter 2002
versus $1,539,739 in the First Quarter 2001. This decrease resulted from a
reduction in the administrative workforce, lower commissions from reduced
hospitality sales, and the change in accounting for goodwill (see Note 5).
Interest expense decreased to $7,770 in the First Quarter 2002 from $23,483 in
the First Quarter 2001 because of reduced borrowings and lower interest rates.
Net income increased to $305,141 in the First Quarter of 2002 compared to a net
loss of $68,734 in the First Quarter of 2001. This increase is largely the
result of increased sales, better material utilization, improved labor
efficiencies and reduced administrative expenses.
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 30, 2002.
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 13, 2002 By: /s/ William A. Bassett
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William A. Bassett, President
Date: May 13, 2002 By: /s/ Michael K. Solomon
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Michael K. Solomon, Treasurer
9