SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Decorator Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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1) Title of each class of securities to which transaction applies:
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[LOGO] DECORATOR INDUSTRIES, INC.
10011 Pines Boulevard
Pembroke Pines, FL 33024
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD MAY 25, 2004
TO THE STOCKHOLDERS OF DECORATOR INDUSTRIES, INC.
Notice is hereby given that the annual meeting of the stockholders of
Decorator Industries, Inc. will be held at Suite 201, 10011 Pines Blvd.,
Pembroke Pines, Florida, on May 25, 2004 at 9:30 A.M., local time, for the
purpose of:
(a) Electing two directors.
(b) Transacting such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors fixed the close of business on April 2, 2004 as
the record date for the determination of stockholders entitled to notice of and
to vote at the annual meeting.
Copies of the Company's proxy statement for the meeting and annual
report to stockholders for the fiscal year ended January 3, 2004 are furnished
herewith.
PLEASE SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES. YOUR PROMPT
COMPLIANCE WITH THIS REQUEST WILL BE APPRECIATED AND WILL ASSIST IN OBTAINING A
QUORUM. YOUR PROXY MAY BE WITHDRAWN AT ANY TIME PRIOR TO ITS EXERCISE BY GIVING
NOTICE TO THE UNDERSIGNED.
By Order of the Board of Directors
JEROME B. LIEBER
Secretary
April 19, 2004
PROXY STATEMENT
DECORATOR INDUSTRIES, INC.
10011 Pines Boulevard
Pembroke Pines, FL 33024
April 19, 2004
This statement is furnished in connection with the solicitation of
proxies to be used at the annual meeting of stockholders of Decorator
Industries, Inc. (the "Company"), to be held May 25, 2004 at the place and time
and for the purposes set forth in the foregoing Notice of Annual Meeting, and at
any adjournment thereof. This proxy statement and the enclosed form of proxy and
annual report for 2003 were mailed to stockholders on or about April 19, 2004.
Proxies in the form enclosed are solicited on behalf of the Board of
Directors of the Company. The cost of preparing, assembling and mailing the
notice of annual meeting, proxy statement and form of proxy is to be borne by
the Company. In addition to the solicitation of proxies by use of the mails,
directors, officers or other employees of the Company may solicit proxies
personally or by telephone or other means and the Company may request certain
persons holding stock in their names or in the names of their nominees to obtain
proxies from and send proxy material to the principals and will reimburse such
persons for their expenses in so doing.
The accompanying proxy may be revoked by the stockholder at any time
prior to its use by giving notice of such revocation either personally or in
writing to Jerome B. Lieber, Secretary of the Company, 40th Floor, One Oxford
Centre, Pittsburgh, PA 15219. Unless the proxy shall have been properly revoked,
the shares represented by proxies in the enclosed form will be voted. Each such
proxy will be voted as directed, but if no direction is indicated, it will be
voted FOR the election of the Board of Directors' nominees named below.
Only holders of record of the Company's Common Stock, par value $.20
per share ("Common Stock"), at the close of business on April 2, 2004 will be
entitled to vote at the meeting. As of April 2, 2004, there were 2,812,155
shares of Common Stock outstanding, the holders of which are entitled to one
vote per share, except for cumulative voting in the election of directors, as
explained below.
A quorum for the transaction of business at the annual meeting will
require the presence, in person or by proxy, of stockholders entitled to cast at
least a majority of the total number of votes entitled to be cast at the
meeting. Directors will be elected at the meeting by a plurality of the votes
cast. Abstentions and broker non-votes are counted as shares present for
determination of a quorum but are not counted as affirmative or negative votes
and are not counted in determining the number of votes cast on any matter.
Stockholders are entitled to cumulative voting in the election of
directors, which means that a stockholder is entitled to a number of votes equal
to the number of shares held by such stockholder multiplied by the number of
directors to be elected, and the stockholder may cast all of such votes for one
nominee or divide them between the two nominees.
1
ELECTION OF DIRECTORS
The Board of Directors consists of three classes of directors with
staggered terms. A purpose of the meeting is the election of two directors to
serve for a term of three years. The last two columns of the tables below give
information regarding the Common Stock beneficially owned by the nominee or
director as of the close of business on April 2, 2004. The percentages in the
last column were computed by dividing the number of shares beneficially owned by
the total of the number of shares of Common Stock outstanding and the number of
shares of Common Stock, if any, which the named nominee or director was entitled
to acquire within 60 days of April 2, 2004 through the exercise of stock
options. Mr. Bassett is trustee of the Trust under the Stock Plan for
Non-Employee Directors (the "Trust").
NOMINEES FOR ELECTION AS DIRECTORS
Information regarding the nominees for election as directors is set
forth below:
Common Shares Percent
Director Beneficially of
Name Age Principal Occupation Since Owned Class
---- --- -------------------- -------- ------------- -------
William A. Bassett 67 Chairman of the Board, 1980 362,290(1) 12.54%
President and Chief Executive
Officer of the Company
William A. Bassett, as 56,286(2) 2.00%
Trustee for the Trust
Thomas L. Dusthimer 69 Consultant to and Director 1997 1,250(3) --
of Key Bank Elkhart
- ----------
(1) Includes 77,082 optioned shares which may be acquired within 60 days.
(2) Mr. Bassett disclaims beneficial ownership of these shares.
(3) Excludes shares held in the Trust for his account.
William A. Bassett has been President of the Company since 1980, Chief
Executive Officer since 1993 and Chairman of the Board since 1994.
Thomas L. Dusthimer has served as a consultant to and director of Key
Bank (Elkhart, Indiana District) since 1992. From 1973 until his retirement in
1992, Mr. Dusthimer served in various executive positions, including President,
Chief Executive Officer and Chairman, with Ameritrust Indiana Corporation and
Ameritrust National Bank.
The above persons were nominated for the office of director by the
present Board of Directors, upon the recommendation of the Nominating Committee.
Such persons have advised the Company that they are willing to serve as
directors for the term for which they are standing for election. If at the time
of the meeting any of the nominees should be unable or unwilling to serve as a
director for any reason, it is intended that the enclosed proxy will be voted
for the election of such person, if any, as is designated by the Board of
Directors to replace such nominee, unless the proxy withholds authority to vote
for nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING NOMINEES.
DIRECTORS WHOSE TERMS CONTINUE AFTER THE MEETING
Information regarding the directors whose terms of office continue
after the annual meeting is set forth below:
Present Common Shares Percent
Director Term Beneficially of
Name Age Principal Occupation Since Expires Owned Class
---- --- -------------------- -------- ------- ------------- -------
Jerome B. Lieber 83 Senior Counsel- 1961 2005 13,705(1)(2) --
Klett Rooney Lieber & Schorling,
A Professional Corporation,
Attorneys at Law
William C. Dixon 46 President and CEO of 2002 2005 --(1) --
Barnes Furniture Co., Inc.
Joseph N. Ellis 75 Management Consultant 1993 2006 2,500(1) --
Ellen Downey 51 Management Consultant 1997 2006 1,562(1) --
- ----------
(1) Excludes shares held in the Trust for his or her account.
(2) Includes 5,040 shares held in a charitable trust as to which Mr. Lieber
disclaims beneficial ownership.
Jerome B. Lieber has been Secretary of the Company since 1961. He is a
Senior Counsel to the law firm of Klett Rooney Lieber & Schorling, a
Professional Corporation, Pittsburgh, Pennsylvania, which serves as general
counsel to the Company. Mr. Lieber previously had been a senior partner in that
firm.
William C. Dixon was appointed as a director in November 2002. He has
been President and CEO of Barnes Furniture Co., Inc. since 1998. Barnes is a
privately held retail furniture company. In addition, Mr. Dixon is President and
50% owner of BFD of Metro Washington, Inc. BFD was established in 2002 and
operates furniture stores in the Washington, DC market. Mr. Dixon is the nephew
of William A. Bassett.
Joseph N. Ellis founded La Salle-Deitch Co., Inc., a distributor of
products for the manufactured housing and recreational vehicle industry in 1963,
and served as its President, Chief Executive Officer and Chairman from 1971
until his retirement in 1992.
2
Ellen Downey was employed by Ryder Systems, Inc. in various financial
positions from 1978 to 1991 and from 1991 to 1993 served as Vice President and
Treasurer of that company.
At April 2 2004, the officers and directors of the Company as a group
had sole or shared voting or investment power as to 432,551 shares of the
Company's Common Stock, which together with 125,414 optioned shares that could
be acquired within 60 days after April 2, 2004, would constitute 18.99% of the
total shares then outstanding.
DIRECTOR INDEPENDENCE
All directors and nominees for director, except Messrs. Bassett and
Lieber, are independent as defined in the company Guide of the American Stock
Exchange LLC.
ATTENDANCE AT STOCKHOLDER MEETINGS
Directors should attend all stockholder meetings if reasonably
possible. All members of the Board attended the 2003 annual meeting of
stockholders.
CODE OF ETHICS
The Company has adopted a Code of Conduct and Ethics which covers all
directors, officers, and managers of the Company. It was filed as Exhibit 14 to
the Company's Annual Report on Form 10-K for the fiscal year ended January 3,
2004.
BOARD AND COMMITTEE MEETINGS
The Board of Directors has the following committees: Audit Committee,
Stock Option Committee, Compensation Committee, and Nominating Committee.
During the fiscal year 2003, the Board of Directors held six meetings.
The Audit Committee consists of Joseph N. Ellis (Chairman), Ellen
Downey, Thomas L. Dusthimer and William C. Dixon. The Audit Committee met twice
during 2003. See "Audit Committee Report" herein.
The Compensation Committee consists of Joseph N. Ellis, Ellen Downey,
and Thomas L. Dusthimer (Chairman). The function of the Compensation Committee
is to determine the salary, bonus and benefits for the Chief Executive Officer
of the Company and to recommend to the Board the salary, bonus and benefits for
all other officers. The Compensation Committee held three meetings in 2003.
The Nominating Committee consists of Joseph N. Ellis, Ellen Downey
(Chairwoman) and Thomas L. Dusthimer. The function of the Nominating Committee
is to recommend to the Board persons to be nominated by the Board for election
as directors and persons to be elected by the Board to fill any vacancies on the
Board. The Nominating Committee met twice in 2003. See "Nominating Committee
Report" herein.
DIRECTOR COMPENSATION
Commencing in 2004, directors who are not employees of the Company are
paid an annual retainer fee of $11,000 per year for their scheduled services as
directors, which includes four meetings per year. The fee is paid quarterly in
shares of the Company's Common Stock valued at their closing price on the
American Stock Exchange on the third business day following the release of sales
and earnings for the preceding fiscal year. Under the Company's Stock Plan for
Non-Employee Directors, such directors may elect to defer receipt of their
shares, until after they leave the Board, by having them delivered to the Trust
established under the Plan. Directors are paid $2,000 for each additional
meeting. Members of the Audit Committee are paid ($2,000 per meeting for
chairman and $1,500 per meeting for other members) for attending Audit Committee
meetings.
PRINCIPAL STOCKHOLDERS
See "Nominees for Election as Directors" above for the stockholding of
William A. Bassett, Chairman of the Board, President and Chief Executive Officer
of the Company.
FMR Corp. of Boston, Massachusetts, has furnished the Company a copy of
its Schedule 13G dated February 14, 2002 in which it reported that as of
December 31, 2001 Fidelity Management & Research Company, a wholly-owned
subsidiary of FMR Corp. and a registered investment adviser, had sole investment
power with respect to 279,715 shares (9.95%) of the Company's Common Stock.
Robert E. Robotti of New York, New York has reported on his Form 4
dated March 16, 2004 beneficial ownership of 427,763 shares of the Company's
Common Stock (15.21%), which includes shared voting and dispositive power as to
422,998 shares through his ownership of Robotti & Company (300,680 shares) and
his position as the managing member of Ravenswood Management Company, LLC, which
is the general partner of The Ravenswood Investment Company, L.P. (122,318
shares), and sole voting and dispositive power as to 4,765 shares held in his
own brokerage account.
Steven C. Leonard of Rancho Santa Fe, California has furnished the
Company a copy of his Schedule 13G dated February 18, 2004 in which he reported
beneficial ownership of a total of 286,320 shares (10.18%) of the Company's
Common Stock, including 244,440 as to which he has shared voting and dispositive
power and 41,880 as to which he has sole voting and dispositive power. The
244,440 shares are beneficially owned by Pacifica Capital Investments LLC, of
which Mr. Leonard is the sole manager.
3
EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS
The Company entered into a new employment agreement with Mr. Bassett in
July 2003. This agreement extends his employment until December 31, 2007 (the
"First Term"). For the five years commencing January 1, 2008, the Company will
employ Mr. Bassett as an employee/consultant (the "Second Term"). His salary
during the First Term shall be no less than $336,000 per annum, to be payable no
less frequently than equal monthly installments. He will be eligible for annual
increases and bonuses commensurate with his and the Company's performance during
the preceding year, the payment and amount of which is to be at the discretion
of the Compensation Committee of the Board of Directors.
During the Second Term, Mr. Bassett will receive compensation of at
least 60% of his salary for 2007, or the average of his salary for 2006, 2007,
and 2008, whichever is greater, payable in not less than equal monthly
installments. In addition, the Company will maintain a long term care policy for
Mr. Bassett and his wife for the Second Term. The Company shall also continue,
maintain and pay the premiums on a $1,000,000 insurance policy and a $1,000,000
key man insurance policy on the life of Mr. Bassett, the proceeds of which key
man insurance less the death benefits payable under the terms of his employment
agreement, shall be payable to Mr. Bassett or his personal representative or
named beneficiary.
ANNUAL COMPENSATION AND STOCK OPTIONS
The following table shows the compensation of certain executive
officers of the Company (the "Named Executive Officers") for each of the last
three fiscal years.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------- ------------
Name and Fiscal Optioned All Other
Principal Position Year Salary($)(1) Bonus ($) Other($)(2) Shares(#)(3) Compensation($)(4)
- ------------------ ------ ------------ --------- ----------- ------------ ------------------
William A. Bassett 2003 343,462 57,571 * -- 36,207
Chairman of the Board, 2002 320,000 28,663 44,610 31,250 27,200
President and Chief 2001 300,000 12,000 * -- 36,843
Executive Officer
Michael K. Solomon 2003 130,614 20,000 * -- 1,474
Vice President, Treasurer 2002 125,000 10,000 * -- 1,349
and Chief Financial Officer 2001 118,820 5,000 * -- 1,224
William A. Johnson 2003 99,423 17,500 * -- 1,114
Controller 2002 90,000 10,000 * 12,500 1,004
2001 82,000 5,000 * -- 884
- ----------
(1) The fiscal year 2003 was a 53-week fiscal period.
(2) Medical/dental reimbursement plan payments, country club memberships, and
personal use of Company vehicles. An asterisk indicates that the total of
other annual compensation for that year was less than 10% of salary and
bonus for that year.
(3) Mr. Bassett received an option for 31,250 shares on October 9, 2002 in
exchange for the cancellation of options for 43,750 shares on March 23,
2002. Mr. Johnson received an option for 12,500 shares on October 9, 2002 in
exchange for the cancellation of options for 11,250 shares on March 23,
2002. These exchanges were made pursuant to the Company's tender offer of
February 22, 2002.
(4) Premiums paid by the Company on life and long-term disability insurance
policies, and Company contributions to the 401(k) Retirement Savings Plan.
Mr. Solomon, age 54, has been Vice President of the Company since 1994
and Treasurer and Chief Financial Officer since 1985. He beneficially owns
109,671 shares of Common Stock, including 38,332 optioned shares that may be
acquired within 60 days of April 2, 2004.
William A. Johnson, age 44, has been Controller of the Company since
January 1997 and an officer of the Company since June 1998. He beneficially owns
10,700 shares of Common Stock, including 10,000 optioned shares that may be
acquired within 60 days of April 2, 2004.
The Company's medical and dental reimbursement plan provides
reimbursement to the corporate and certain divisional officers of the Company
and their dependents (as defined in Section 152 of the Internal Revenue Code)
for their medical and dental expenses. Benefits under the plan are limited to
10% of the participant's compensation during the plan year. The plan also
prohibits any participant from receiving "double reimbursement"; i.e., if a
participant receives reimbursement from another source, he or she must remit to
the Company benefits received under the plan.
On September 1, 1998 the Company began a 401(k) Retirement Savings Plan
available to all eligible employees. To be eligible for the plan, the employee
must be at least 21 years of age and have completed one year of employment.
Eligible employees may contribute up to 75% of their earnings with a maximum of
$12,000 for 2003 ($14,000 for employees over 50 years of age) based on the
Internal Revenue Service annual contribution limit. The Company will match 25%
of the first 4% of the employee's contributions up to 1% of the employee's
earnings. Contributions are invested at the direction of the employee in one or
more funds. Company contributions begin to vest after two years.
The Company's 1984 Incentive Stock Option Plan, which expired February
22, 1994, authorized the granting to key employees of options to purchase up to
804,976 shares (as adjusted for stock splits) of the Company's Common Stock. The
purchase price of optioned shares was the fair market value of the Common Stock
on the date of grant, and the maximum term of the options is ten years. The
number of optioned shares and the purchase price per share are subject to
adjustment for stock splits, stock dividends, reclassifications and the like.
4
On April 3, 1995 the Board of Directors adopted, and on June 5, 1995
the stockholders approved, the Company's 1995 Incentive Stock Option Plan (the
"1995 Plan") which has a term of ten years. The 1995 Plan authorizes the
issuance of up to 520,830 shares (as adjusted for stock splits) of Common Stock
pursuant to stock options granted to key employees of the Company. The purchase
price of optioned shares must be the fair market value of the Common Stock on
the date of grant, and the maximum term of the options is ten years; in the case
of options granted to employees who own more than 10% of the outstanding Common
Stock, however, the purchase price must be 110% of the fair market value of the
Common Stock on the date of grant and the term of the option cannot exceed five
years. The number of shares that may be issued under the 1995 Plan, the number
of optioned shares and the purchase price per share are subject to adjustment
for stock splits, stock dividends, reclassifications and the like.
The following table sets forth information concerning the exercise of
stock options during fiscal year 2003 by the Named Executive Officers and the
value of their unexercised, in-the-money stock options at the end of that fiscal
year (January 3, 2004). All options outstanding at January 3, 2004, have a ten
year term and, except for those granted after the fiscal year 1995, were
exercisable at any time prior to their respective expiration dates. Options
granted in 1996 and 1997 vest 20% on the date of the grant and 20% each year
thereafter, and options granted in 1998 vest 20% each year beginning at the end
of the first year. The options granted in 2002 have varying vesting schedules.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Value of
Shares Acquired Value Optioned Shares Options at
Name on Exercise Realized at 1/3/04(#) 1/3/04($)(1)
- ---- --------------- -------- --------------- ------------
William A. Bassett -- -- 97,914(2) $115,371
6,250(3) 2,750
Michael K. Solomon -- -- 46,704(2) $ 43,057
1,000(3) --
William A. Johnson -- -- 10,000(2) $ 4,400
2,500(3) 1,100
- ----------
(1) Assumes a market value of $6.30 per share, which was the closing price on
the American Stock Exchange on January 2, 2004.
(2) Exercisable.
(3) Unexercisable.
BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
The Board of Directors has approved the salaries of the executive
officers of the Company on an annual basis. In approving the salaries, the Board
considered the size of the Company, its performance during the previous fiscal
year, the responsibilities and performance of the executive officer, and such
other factors as the directors wished to consider. No pre-determined formula or
guidelines were used, and no specific weight was given to any one factor.
The Board has also granted stock options to executive officers and
other key employees as a means of further motivating them to exert their best
efforts on behalf of the Company.
The salary and other benefits of Mr. Bassett, Chief Executive Officer
of the Company, for the fiscal years 2003 and 2004 were determined by the Board
of Directors (without Mr. Bassett's participation) upon recommendation of the
Compensation Committee, which was composed of Messrs. Ellis, Dusthimer, and
Lieber and Ms. Downey. Such recommendation was based upon consideration of his
and the Company's performance during the previous fiscal year, the
responsibilities of that office, and Mr. Bassett's contributions to the growth
and development of the Company. No specific weight was given to any one of the
factors considered.
For the year 2005 and subsequent years, the Compensation Committee,
composed of independent directors, will determine the salary, bonus and benefits
of the Chief Executive Officer and will recommend to the Board the salary, bonus
and benefits of the other officers of the Company. In determining the
compensation of the Chief Executive Officer, the Compensation Committee will
consider (i) the compensation package as a whole, including his or her salary,
bonus, stock options and other perquisites, (ii) his or her performance both
quantitatively and qualitatively, (iii) whether the financial goals of the
Company, including both sales growth and return on equity have been met, (iv)
the sales/revenue increases of the Company, (v) the compensation packages of
other companies of similar size and in the Company's line of business, to the
extent such information is available, and (vi) such other factors as the
Committee may deem relevant at the time.
Board of Directors: William A. Bassett, Joseph N. Ellis, William C.
Dixon, Jerome B. Lieber, Ellen Downey, Thomas L. Dusthimer
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on our records and other information, we believe that during the
fiscal year 2003 all of our directors and executive officers complied with the
reporting requirements of section 16(a) of the Securities Exchange Act of 1934.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors serves as a focal point
for communications among the Board, the outside auditors and management as their
duties relate to financial accounting, reporting and internal controls. It
reviews the overall plan of the annual independent audit, the financial
statements, the scope of audit procedures, the performance of the Company's
independent auditors, and the independent auditors' evaluation of internal
controls. The Audit Committee assists the Board in fulfilling its fiduciary
responsibilities as to accounting policies, financial reporting practices and
the sufficiency of auditing with respect thereto; however, management has the
primary responsibility for the financial statements and the financial reporting
process. The Audit Committee is to select the Company's outside auditors and
review and oversee any "related party transactions" with the Company. The Audit
Committee Charter, as amended, is attached to this proxy statement as
Appendix A.
5
The Board has determined that the current members of the Committee,
listed below, are "independent" as defined in Section 121A of the Company Guide
of the American Stock Exchange, and in Rule IOA3 under the Securities Exchange
Act of 1934 and that the Committee qualifies under Section 121B(2) of the
Company Guide. Ellen Downey qualifies as an "audit committee financial expert"
as defined by the rules of the Securities Exchange Commission.
The Audit Committee has reviewed and discussed with management the
audited financial statements of the Company for the fiscal year ended January 3,
2004 and has also discussed with Louis Plung & Company, the Company's
independent auditors for that fiscal year, their judgment as to the
acceptability and quality of the Company's accounting principles and the other
matters required by Statement on Auditing Standards 61 to be discussed with the
independent auditors. In addition, the Audit Committee received from Louis Plung
& Company the written disclosures and letter required by Independence Standards
Board Standard No. 1 and has discussed with them their independence from the
Company and its management. The Committee has also considered whether the
provision of nonaudit services to the Company by Louis Plung & Company is
compatible with maintaining their independence. Based on such review and
discussions, the Audit Committee recommended to the Board that the audited
financial statements for the fiscal year ended January 3, 2004 be included in
the Company's Annual Report on Form 10-K for that fiscal year and for filing
with the Securities and Exchange Commission.
Audit Committee: Joseph N. Ellis, Chairman, Ellen Downey, Thomas L.
Dusthimer and William C. Dixon.
NOMINATING COMMITTEE REPORT
The Board of Directors has adopted a Resolution which establishes the
Nominating Committee and sets forth its functions. The Resolution provides as
follows:
The Nominating Committee of the Board of Directors shall consist of two
or more directors, each of whom shall be an "Independent Director" as
defined in the Company Guide of the American Stock Exchange LLC
("Amex"), and no director shall qualify as independent unless the Board
affirmatively determines that he or she does not have a material
relationship with the Company that would interfere with the exercise of
independent judgement. The Committee shall elect its Chairperson from
among its membership. The function of the Nominating Committee shall be
to recommend to the Board persons to be nominated by the Board for
election as directors and persons to be elected by the Board to fill
any vacancies on the Board.
No employee or Floor Member of the Amex may be nominated as a director
of the Company. The Committee will consider for recommendation to the
Board nominees proposed by the shareholders entitled to vote who
deliver notice to the Secretary of the Company not less than 45 days
nor more than 75 days prior to the first anniversary of the record date
for the preceding year's annual meeting, commencing with the annual
meeting in the year 2005.
The members of the Nominating Committee shall hereafter be Joseph N.
Ellis, Ellen Downey (Chairperson) and Thomas L. Dusthimer, each of whom
is an Independent Director who has been determined by the Board not to
have a material relationship with the Company that would interfere with
the exercise of independent judgement.
No shareholders proposed nominees for election as directors at this
annual meeting. The two nominees approved by the Board were recommended by the
Nominating Committee because of their experience on the Board and their
knowledge of the Company's business and industry. In the future, the Committee
will consider the following factors in evaluating proposed nominees:
o the needs of the Company with respect to the particular
talents and experience of its incumbent directors;
o the knowledge, skills and experience of the candidate,
including experience in the markets the Company services,
business, finance, in light of prevailing business conditions,
and the knowledge, skills and experience already possessed by
other members of the Board;
o experience with accounting rules and practices;
o references obtained with respect to the candidate;
o the amount of time the candidate can devote to serving on the
Board, and the number of other boards and board committees on
which the candidate serves; and
o the desire to balance the considerable benefit of continuity
with the periodic injection of fresh perspectives provided by
new members.
There are no stated minimum criteria for director nominees. None of the
foregoing factors is an absolute requirement. The Nominating Committee will
evaluate all of these factors, and others, as necessary to satisfy the Company's
needs and objectives at the time a candidate is being considered. The Nominating
Committee's goal is to assemble a Board of Directors that brings to the Company
a variety of perspectives and skills derived from high quality business and
professional experience.
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS
- -----------------------------------------
The Board has established a process for shareholders to communicate
with members of the Board. The Chairman of the Nominating Committee, with the
assistance of the Company's Secretary, will be primarily responsible for
monitoring communications from shareholders and providing copies or summaries of
such communications to the other Directors, as he or she considers appropriate.
Shareholders who wish to send communications to the Board may do so by writing:
Ellen Downey, Chairperson of the Nominating Committee, c/o the Company's
Secretary, 40th Floor, One Oxford Centre, Pittsburgh, PA 15219-6498
PERFORMANCE GRAPH
Set forth on the following page is a graph which compares the value for
the five calendar years ended December 31, 2003 of $100 invested at the close of
trading on December 31, 1998, in each of the following investment alternatives:
(a) the Company's Common Stock, (b) the "Russell 2000" Index, and (c) the "S & P
500" Index. The graph has been prepared assuming the reinvestment of all cash
dividends paid during the period. The Company is not able to identify a peer
group for comparison purposes.
6
[GRAPHIC OMITTED]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among Decorator Industries, Inc., The S & P 500 Index and The Russell 2000 Index
12/98 12/99 12/00 12/01 12/02 12/03
DECORATOR 100.00 70.51 36.80 56.16 77.91 95.76
S&P 500 100.00 121.04 110.02 96.95 75.52 97.18
RUSSELL 2000 100.00 121.26 117.59 120.52 95.83 141.11
DISCRETIONARY AUTHORITY
At the time of mailing copies of this proxy statement to stockholders,
the election of directors was the only matter known by management that will be
presented for action at the annual meeting of stockholders. Should any other
matters come before the meeting, action may be taken thereon pursuant to proxies
in the form enclosed, which confer discretionary authority upon the persons
named therein or their substitutes with respect to any such business which may
properly come before the meeting.
CONCERNING THE AUDITORS
Louis Plung & Company are the independent public accountants of the
Company and have been selected as the Company's independent public accountants
for the current fiscal year by the Audit Committee. Representatives of such firm
are not expected to be in attendance at the annual meeting.
AUDIT FEES
The following table presents fees for professional audit services
rendered by Louis Plung & Company for the audit of the Company's annual
financial statements for the fiscal years ended January 3, 2004, and December
28, 2002, and fees billed for other services rendered by Louis Plung & Company
during those periods. Certain amounts for 2002 have been reclassified to conform
to the 2003 presentation.
Audit Fees(1) Audit Related Fees Tax Fees All Other Fees Total
------------- ------------------ -------- -------------- -------
2003 $43,200 -- $19,000 -- $62,200
2002 $41,200 -- $19,700 -- $60,900
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(1) Professional services rendered for the audit of the Company's financial
statements for the fiscal year ended January 3, 2004, the audit of the
Company's 401(k) plan, and the reviews of the financial statements included
in the Company's Forms 10-Q for that fiscal year.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITOR
The Audit Committee is responsible for the pre-approval of all audit
and permitted non-audit services performed by outside auditors, and will not
engage outside auditors to perform any non-audit services proscribed by law or
regulation. The Audit Committee may delegate authority for the pre-approval of
all audit and non-audit services to a member of the Committee. All such
approvals will be reported to the Audit Committee at its next scheduled meeting.
The approval of a non-audit service to be performed by the outside auditors
shall be disclosed to the investors in a timely manner in accordance with
applicable regulations.
OTHER INFORMATION
The Nominating Committee will consider nominees recommended by
stockholders for election as directors at the annual meeting in the year 2005 if
information concerning the recommended nominees is received by the Company not
later than February 17, 2005 and not before January 18, 2005.
Stockholder proposals intended to be presented at the annual meeting in
the year 2005 must be received by the Company prior to December 24, 2004 to be
considered for inclusion in the Company's proxy statement and form of proxy for
that meeting.
By Order of the Board of Directors
JEROME B. LIEBER
Secretary
7
APPENDIX A
AUDIT COMMITTEE CHARTER
RESOLUTION
The Board of Directors of Decorator Industries, Inc. (the "Board")
hereby defines the authority, responsibility and specific duties of its Audit
Committee ("Committee") as described below.
COMPOSITION AND TERM
The Committee shall be composed of three or more Directors appointed by
the Board of Directors. Each member of the Committee shall be "independent" as
required by Section l0A of the Securities Exchange Act of 1934, as amended
("Section 10A"), and the rules and regulations thereunder and by the Company
Guide of the American Stock Exchange LLC ("Amex"). No member of the Committee
may directly or indirectly accept any consulting, advisory or other compensatory
fee from the Company, except in his or her capacity as a member of the
Committee, the Board of Directors or any other Board Committee. Each member of
the Committee shall be able to read and understand fundamental financial
statements, including a company's balance sheet, income statement and cash flow
statement or will become able to do so within a reasonable period of time after
his or her appointment to the Committee. At least one member must have past
employment experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or background which
results in his or her financial sophistication, including a current or past
position as chief executive or financial officer or other senior officer with
financial oversight responsibilities. One of the members shall be appointed
Committee Chairman by the Board of Directors. The term of appointment of each
member shall be at the discretion of the Board, provided that continuity is
maintained.
AUTHORITY
The Committee may be requested by the Board of Directors to investigate
any activity of the Company, and all employees are directed to cooperate as
requested by the members of the Committee. The Committee is empowered to retain,
at Company expense, advisers having special competence as necessary to assist
the Committee in fulfilling its responsibilities, such as independent legal
counsel and accounting consultants. The Company's outside auditors have ultimate
accountability to the Board of Directors and the Committee, as representatives
of the stockholders. The Committee has ultimate authority and responsibility to
select, evaluate and, where appropriate, replace the outside auditors (or to
nominate the outside auditors to be proposed for stockholder approval in any
proxy statement) and to determine the compensation of the outside auditors, to
be paid by the Company. The outside auditors must report directly to the
Committee.
RESPONSIBILITIES
The Committee is to serve as a focal point for communications between
non-Committee Directors, the outside auditors, internal audit and Decorator
Industries, Inc.'s management, as their duties relate to financial accounting,
reporting and controls. The Committee is to assist the Board of Directors in
fulfilling its fiduciary responsibilities as to accounting policies and
reporting practices of Decorator Industries, Inc. and the sufficiency of
auditing relative thereto. It is to be the Board's principal agent in ensuring
the independence of the Company's outside auditors, the integrity of management
and the adequacy of disclosures to stockholders. In this regard, the Committee
shall be responsible for ensuring its receipt from the outside auditors of a
formal written statement delineating all relationships between the auditors and
the Company, consistent with Independence Standards Board Standard 1, and for
actively engaging in a dialogue with the auditors with respect to any disclosed
relationships or services that may impact the objectivity and independence of
the auditors and for taking, or recommending that the full Board take,
appropriate action to oversee the independence of the outside auditors.
The Committee will review and discuss with management and the outside
auditors the scope of services required at the commencement of the audit of the
Company's financial statements, matters relating to the conduct of the audit,
and the results of the audit.
The Committee will review management's assessment of the adequacy of
internal controls and the resolution of identified material weaknesses and
reportable conditions in internal controls, including the prevention and
detection of management override or compromise of internal controls.
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* As amended and adopted by the Board of Directors on March 2, 2004.
A-1
The Committee will review the Report on Internal Controls that is filed
within the Company's Annual Report on Form 10-K. That report will state the
responsibilities of management for establishing and maintaining an adequate
internal control structure and procedures for financial reporting and contain an
assessment of the effectiveness of such structure and procedures. The Committee
will also review the outside auditors' examination of management's assertion
regarding the Company's internal controls for financial reporting.
The Committee will review with management and the outside auditors the
Company's annual financial statements and the related opinion thereon, prior to
filing with the Securities and Exchange Commission ("SEC"). The Chief Executive
Officer and Chief Financial Officer will be present at this review, which will
include a review of the Company's disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" to be included in the
Company's Annual Report on Form 10-K, as well as any other matters to be
reviewed under the requirements of the SEC, other regulatory agencies, or the
Amex. The Committee will review the outside auditors' judgement about the
quality of accounting principles as applied in financial reporting, and will
review and assess the reasonableness of analyses prepared by management and the
outside auditors setting forth significant financial reporting issues and
judgements made in connection with the preparation of financial statements.
Specifically, the outside auditors will report to the Committee (i) all critical
accounting policies and practices used by the Company. (ii) all material
alternative accounting treatments of financial information within generally
accepted accounting principles that have been discussed with management,
including the ramifications of the use of such alternative treatments and
disclosures and the treatment preferred by the outside auditors, and (iii) other
material written communications between the outside auditors and management.
The Committee will review the interim financial statements and
disclosures under "Management's Discussion and Analysis of Financial Conditions
and Results of Operations" with management and the outside auditors prior to the
filing of the Company's Quarterly Report on Form 10-Q. The Chief Executive
Officer and Chief Financial Officer must be present at this review. Also, the
Committee will discuss the results of the quarterly review and any other matters
required to be communicated to the Committee by the outside auditors under
generally accepted auditing standards, including Statement on Auditing Standards
No. 61. The Chairman of the Committee may represent the entire Committee for the
purposes of this review.
The Committee shall review and oversee any "related party transactions"
with the Company as described in Item 404 of SEC Regulation S-K, irrespective of
the dollar amount or value of the transaction.
The Committee shall establish and maintain procedures for (i) the
receipt, retention and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters and (ti) the
confidential, anonymous submission by Company employees of concerns regarding
questionable accounting or auditing matters.
The Committee shall review disclosures by the Company's principal
executive officer and principal financial officer regarding compliance with
their certification obligations as required under the Sarbanes-Oxley Act of 2002
and the rules and regulations promulgated thereunder, including the Company's
disclosure controls and procedures and internal controls for financial reporting
and evaluation thereof.
The Committee wilt receive from the outside auditors written
disclosures about their independence and discuss with them any factors that
might detract from their independence. The outside auditors will not be
independent if, at any point during the audit and professional engagement
period, any audit partner earns or receives compensation based on that partner's
procuring engagements with the Company to provide any services other than audit,
review, or attest services. The lead (or coordinating) audit partner having
primary responsibility for the audit, and the audit partner responsible for
reviewing the audit, cannot have performed audit services for the Company in
each of the five previous fiscal years of the Company, except as such partners
may be exempted by paragraph (c)(6)(ii) of section 210.2-01 of SEC Regulation
S-X. Other audit partners will be subject to rotation periods as prescribed by
law or regulation.
The Committee is responsible for the pre-approval of all audit and
permitted non-audit services performed by the outside auditors, and the
Committee will not engage outside auditors to perform any non-audit services
proscribed by law or regulation. The Committee may delegate authority for the
pre-approval of all audit and non-audit services to a member of the Committee.
All such approvals will be reported to the Committee at its next scheduled
meeting. The approval of a non-audit service to be performed by the outside
auditors shall be disclosed to investors in a timely manner in accordance with
Section l0A and the rules and regulations thereunder.
The Committee will require the outside auditors to certify annually
that they are in compliance with all applicable legal and regulatory
requirements, including those addressing rotation of lead and concurring
partners, provisions of prohibited services, document retention, and the
submission of timely reports.
The Committee will prohibit management from hiring as a manager
overseeing financial reporting matters of the Company any person who was
employed by the outside auditors and was the lead partner, concurring partner,
or any other member of the audit engagement team who provided audit, review or
attest services for the Company within the one-year period preceding the
commencement of the audit of the current fiscal year's financial statements.
A-2
ATTORNEYS
The Committee will review and discuss any reports received from
attorneys with respect to apparent or possible securities law violations and/or
breaches of fiduciary duties which were reported to the Chief Executive Officer
and not resolved to the satisfaction of the reporting attorney.
GENERAL
The Committee, the outside auditors and the audits of the Company's
financial statements must comply in all respects with the provisions of Section
l0A and the rules and regulations thereunder.
MEETINGS
The Committee is to meet at least four (4) times each fiscal year and
as often as necessary to fulfill its duties and responsibilities. The Committee
will report to the Board on at least an annual basis and as many more times as
the Committee or the Board deems necessary.
ATTENDANCE
Members of the Committee are to be present at all meetings. As
necessary or desirable, the Chairman may request that members of management and
representatives of the outside auditors be present at meetings of the Committee.
A-3