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 July 2, 2005
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
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 August 12, 2005
------------------- ------------------------------
Common Stock, Par Value $.20 Per Share 2,881,769
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DECORATOR INDUSTRIES, INC.
BALANCE SHEETS
ASSETS JULY 2, JANUARY 1,
2005 2005
----------- -----------
(UNAUDITED)
CURRENT ASSETS:
Cash and Cash Equivalents $ 376,706 $ 730,539
Accounts Receivable, less allowance for
doubtful accounts ($152,077 and $144,077) 5,211,265 3,464,674
Inventories 5,313,053 5,113,651
Other Current Assets 516,390 588,853
----------- -----------
TOTAL CURRENT ASSETS 11,417,414 9,897,717
----------- -----------
Property and Equipment
Land, Buildings & Improvements 7,249,467 7,250,064
Machinery, Equipment, Furniture & Fixtures 6,366,404 6,482,534
----------- -----------
Total Property and Equipment 13,615,871 13,732,598
Less: Accumulated Depreciation and Amortization 6,151,283 5,874,855
----------- -----------
Net Property and Equipment 7,464,588 7,857,743
----------- -----------
Goodwill, less accumulated Amortization of $1,348,569 2,731,717 2,731,717
Identifiable intangible asset, less accumulated Amortization
of $935,713 and $611,713 2,959,278 3,283,278
Other Assets 245,017 191,622
----------- -----------
TOTAL ASSETS $24,818,014 $23,962,077
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 3,406,849 $ 2,539,252
Current Maturities of Long-term Debt 188,869 170,709
Checks Issued but Not Yet Presented 571,642 --
Accrued Expenses:
Compensation 886,072 1,016,262
Acquisition Liability -- 1,067,472
Other 1,090,829 936,146
----------- -----------
TOTAL CURRENT LIABILITIES 6,144,261 5,729,841
----------- -----------
Long-Term Debt 1,649,244 1,752,568
Deferred Income Taxes 604,000 680,000
----------- -----------
TOTAL LIABILITIES 8,397,505 8,162,409
----------- -----------
Stockholders' Equity
Common Stock $.20 par value: Authorized shares, 10,000,000;
Issued shares, 4,534,282 and 4,489,728 906,856 897,946
Paid-in Capital 1,510,125 1,423,275
Retained Earnings 22,120,382 21,633,044
----------- -----------
24,537,363 23,954,265
Less: Treasury stock, at cost: 1,652,513 and 1,660,197 shares 8,116,854 8,154,597
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 16,420,509 15,799,668
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $24,818,014 $23,962,077
=========== ===========
The accompanying notes are an integral part of the financial statements.
1
DECORATOR INDUSTRIES, INC.
STATEMENTS OF EARNINGS
(UNAUDITED)
FOR THE THIRTEEN WEEKS ENDED FOR THE TWENTY-SIX WEEKS ENDED
------------------------------------------------ ------------------------------------------------
JULY 2, 2005 JULY 3, 2004 JULY 2, 2005 JULY 3, 2004
----------------------- ----------------------- ----------------------- -----------------------
Net Sales $ 13,275,952 100.0% $ 14,320,830 100.0% $ 25,707,334 100.0% $ 27,112,878 100.0%
Cost of Products Sold 10,687,552 80.5% 11,349,047 79.2% 20,517,235 79.8% 21,857,867 80.6%
------------ ------------ ------------ ------------
Gross Profit 2,588,400 19.5% 2,971,783 20.8% 5,190,099 20.2% 5,255,011 19.4%
Selling and
Administrative Expenses 2,202,951 16.6% 2,081,898 14.6% 4,146,408 16.1% 4,036,921 14.9%
------------ ------------ ------------ ------------
Operating Income 385,449 2.9% 889,885 6.2% 1,043,691 4.1% 1,218,090 4.5%
Other Income (Expense)
Interest, Investment and
Other Income 22,866 0.1% 26,035 0.2% 40,159 0.2% 53,476 0.2%
Interest Expense (18,998) -0.1% (28,308) -0.2% (41,197) -0.2% (55,070) -0.2%
------------ ------------ ------------ ------------
Earnings Before Income Taxes 389,317 2.9% 887,612 6.2% 1,042,653 4.1% 1,216,496 4.5%
Provision for Income Taxes 148,000 1.1% 349,000 2.4% 383,000 1.5% 477,000 1.8%
------------ ------------ ------------ ------------
NET INCOME $ 241,317 1.8% $ 538,612 3.8% $ 659,653 2.6% $ 739,496 2.7%
============ ============ ============ ============
EARNINGS PER SHARE
BASIC $ 0.08 $ 0.19 $ 0.23 $ 0.26
============ ============ ============ ============
DILUTED $ 0.08 $ 0.18 $ 0.22 $ 0.25
============ ============ ============ ============
Weighted Average
Number of Shares Outstanding
Basic 2,880,102 2,813,699 2,866,186 2,809,831
Diluted 3,015,562 2,956,044 3,005,009 2,942,386
The accompanying notes are an integral part of the financial statements.
2
DECORATOR INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE TWENTY-SIX WEEKS ENDED
------------------------------
JULY 2, 2005 JULY 3, 2004
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 659,653 $ 739,496
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation and Amortization 733,110 673,901
Provision for Losses on Accounts Receivable 8,000 --
Deferred Taxes (86,000) 15,000
Loss (Gain) on Disposal of Assets 160,622 (584)
Increase (Decrease) from Changes in:
Accounts Receivable (1,754,591) (1,893,246)
Inventories (199,402) (320,837)
Prepaid Expenses 69,953 (406,773)
Other Assets (64,435) 168,056
Accounts Payable 867,597 2,024,129
Accrued Expenses 24,493 (3,443)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 419,000 995,699
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid for acquisitions (1,067,472) (4,083,277)
Capital Expenditures (222,627) (552,420)
Proceeds from Property Dispositions 69,600 1,150
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,220,499) (4,634,547)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term Debt Payments (85,164) (84,666)
Dividend Payments (172,315) (168,773)
Change in Checks Issued but Not Yet Presented 571,642 --
Proceeds from Exercise of Stock Options 100,003 17,580
Issuance of Stock for Directors Trust 33,500 25,000
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 447,666 (210,859)
Net Decrease in Cash and Cash Equivalents (353,833) (3,849,707)
Cash and Cash Equivalents at Beginning of Year 730,539 3,991,631
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 376,706 $ 141,924
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Interest $ 75,568 $ 26,527
Income Taxes $ 186,372 $ 621,757
3
DECORATOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
TWENTY-SIX WEEKS ENDED JULY 2, 2005 AND JULY 3, 2004
(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 July 2, 2005, the changes therein
for the twenty-six week period then ended and the results of operations
for the twenty-six week periods ended July 2, 2005 and July 3, 2004.
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 in
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
January 1, 2005. The results of operations for the twenty-six week
periods ended July 2, 2005 and July 3, 2004 are not necessarily
indicative of operating results for the full year.
NOTE 3. INVENTORIES
Inventories at July 2, 2005 and January 1, 2005 consisted of the
following:
JULY 2, 2005 JANUARY 1, 2005
------------ ---------------
Raw Material and supplies $4,735,819 $4,438,916
In Process and Finished Goods 577,234 674,735
---------- ----------
Total Inventory $5,313,053 $5,113,651
========== ==========
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:
FOR THE THIRTEEN WEEKS ENDED FOR THE TWENTY-SIX WEEKS ENDED
---------------------------- ------------------------------
JULY 2, 2005 JULY 3, 2004 JULY 2, 2005 JULY 3, 2004
------------ ------------ ------------ ------------
Numerator:
Net income $ 241,317 $ 538,612 $ 659,653 $ 739,496
========== ========== ========== ==========
Denominator:
Weighted-average number of
common shares outstanding 2,880,102 2,813,699 2,866,186 2,809,831
Dilutive effect of
stock options on net income 135,460 142,345 138,823 132,555
---------- ---------- ---------- ----------
3,015,562 2,956,044 3,005,009 2,942,386
========== ========== ========== ==========
Diluted earnings per share: $ 0.08 $ 0.18 $ 0.22 $ 0.25
========== ========== ========== ==========
4
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
The Company's financial ratios improved as illustrated below. The financial
condition remains strong, and the long-term debt to total capitalization ratio
remained low at 9.13%
JULY 2, 2005 JANUARY 1, 2005
------------ ---------------
Current Ratio 1.86:1 1.73:1
Quick Ratio 0.99:1 0.83:1
LT Debt to Total Capital 9.13% 9.98%
Working Capital $5,273,153 $4,167,876
The Company paid $1,067,472 (plus accrued interest) in January 2005 relating to
the January 2004 acquisition of Fleetwood Enterprises, Inc.'s drapery operation
in Douglas, Georgia. This payment represented the final payment of the purchase
price due to Fleetwood. The Company drew on its line of credit to make this
payment. At July 2, 2005, the Company had no outstanding borrowings on its line
of credit. The Company expects to use its line of credit periodically in 2005.
In January 2004, the Company began assigning certain account receivables under a
"Receivables Servicing and Credit Approved Receivables Purchasing Agreement"
with CIT Group/Commercial Services Inc. Only receivables from sales to the
Hospitality industry may be assigned to CIT. Under the agreement CIT provides
credit checking, credit approval, and collection responsibilities for the
assigned receivables. If CIT approves an order from a Hospitality customer and
the resulting receivables are not paid or disputed by the Customer within ninety
days of sale, CIT will pay the receivable to the Company and assume ownership of
the receivable. CIT begins collection efforts for the assigned receivables (both
approved and not approved) when they are due (Hospitality sales are made on Net
30 terms). Hospitality customers are instructed to make payments directly to CIT
and CIT then wires collected funds to the Company. The Company pays CIT
six-tenths of a percent of all assigned receivables. Management believes this
cost is mostly offset by reductions in Bad Debt expense and collection costs.
The Company entered into this arrangement to take advantage of CIT's extensive
credit checking and collection capabilities. Management believes this
arrangement has improved liquidity.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
Days sales outstanding in accounts receivable were 34.8 days at July 2, 2005
compared to 33.4 days at July 3, 2004. Net accounts receivable decreased by
$201,399 and inventories decreased by $388,295 from July 3, 2004 to July 2,
2005. The decreases in net accounts receivable and inventories are primarily due
to the slowdown in sales to the recreation vehicle market.
Capital expenditures were $222,627 for the twenty-six weeks ended July 2, 2005,
compared to $552,420 for the same period of the prior year. The prior year
expenditures included a building addition to the Company's Elkhart, Indiana
facility of $303,410, which increased the Company's pleated shade capacity.
Capital expenditures for the second half of 2005 will be higher than
expenditures in the first half. The Company will spend approximately $400,000 to
convert its Enterprise-Resource-Planning (ERP) system to a different software
platform. Total capital expenditures for 2005 are projected to be in excess of
$1,000,000.
The Company had sporadic borrowings against its $5,000,000 line of credit during
the second quarter. The maximum borrowed was less than $400,000, and there were
no outstanding borrowings at the end of the second quarter.
Management does not foresee any events which will adversely affect its liquidity
during 2005.
SALES BY MARKET
The following table represents net sales to each of the three different markets
that the Company serves for the thirteen week and twenty-six week periods ended
July 2, 2005 and July 3, 2004:
(dollars in thousands)
FOR THE THIRTEEN WEEKS ENDED FOR THE TWENTY-SIX WEEKS ENDED
------------------------------------ ------------------------------------
JULY 2, 2005 JULY 3, 2004 JULY 2, 2005 JULY 3, 2004
--------------- --------------- --------------- ---------------
NET % OF NET % OF NET % OF NET % OF
SALES TOTAL SALES TOTAL SALES TOTAL SALES TOTAL
------- --- ------- --- ------- --- ------- ---
Recreational Vehicle $ 7,060 53% $ 8,693 61% $14,351 56% $16,944 62%
Manufactured Housing 2,671 20% 2,631 18% 5,128 20% 4,873 18%
Hospitality 3,545 27% 2,997 21% 6,228 24% 5,296 20%
------- --- ------- --- ------- --- ------- ---
Total Net Sales $13,276 100% $14,321 100% $25,707 100% $27,113 100%
======= ======= ======= =======
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
RESULTS OF OPERATIONS
THIRTEEN WEEK PERIOD ENDED JULY 2, 2005, (SECOND QUARTER 2005) COMPARED TO
THIRTEEN WEEK PERIOD ENDED JULY 3, 2004, (SECOND QUARTER 2004)
The following table shows a comparison of the results of operations between
Second Quarter 2005 and Second Quarter 2004:
SECOND QUARTER % SECOND QUARTER % $ INCREASE
2005 OF SALES 2004 OF SALES (DECREASE) % CHANGE
-------------- -------- -------------- -------- ----------- --------
Net Sales $ 13,275,952 100% $ 14,320,830 100% $(1,044,878) -7.3%
Cost of Products Sold 10,687,552 80.5% 11,349,047 79.2% (661,495) -5.8%
------------ ---- ------------ ---- -----------
Gross Profit 2,588,400 19.5% 2,971,783 20.8% (383,383) -12.9%
Selling and Administrative Expenses 2,202,951 16.6% 2,081,898 14.6% 121,053 5.8%
------------ ---- ------------ ---- -----------
Operating Income 385,449 2.9% 889,885 6.2% (504,436) -56.7%
Other Income (Expense)
Interest, Investment and
Other Income 22,866 0.1% 26,035 0.2% (3,169) -12.2%
Interest Expense (18,998) -0.1% (28,308) -0.2% 9,310 -32.9%
------------ ---- ------------ ---- -----------
Earnings Before Income Taxes 389,317 2.9% 887,612 6.2% (498,295) -56.1%
Provision for Income Taxes 148,000 1.1% 349,000 2.4% (201,000) -57.6%
------------ ---- ------------ ---- -----------
NET INCOME $ 241,317 1.8% $ 538,612 3.8% $ (297,295) -55.2%
============ ==== ============ ==== ===========
Net sales for the Second Quarter 2005 were $13,275,952, compared to $14,320,830
for the same period in the previous year, a 7.3% decrease. This is due to an
18.8% drop in sales to the Company's recreational vehicle customers, partially
offset by increases of 1.5% and 18.3% to the Company's manufactured housing and
hospitality customers, respectively. The recreational vehicle industry reported
a drop in shipments of 4.9% for the Second Quarter 2005 compared to the same
period of the prior year. The manufactured housing industry reported that
shipments for the Second Quarter 2005 decreased by 0.3% compared to the same
period of the prior year.
Cost of products sold increased to 80.5% in the Second Quarter 2005 compared to
79.2% a year ago. The major reasons for the increase in this percentage were
higher raw material costs as a percentage of sales, and somewhat higher overhead
costs spread over a lower sales volume. Some of the increased costs are due to
the opening of the Company's Phoenix, Arizona plant, which began production in
December 2004.
Selling and administrative expenses were $2,202,951 in the Second Quarter 2005
versus $2,081,898 in the Second Quarter 2004. The reason for this increase was a
pretax charge of $165,647 in the Second Quarter 2005 resulting from the
Company's decision to convert its ERP system to a different software platform.
The percentage of selling and administrative expenses to net sales increased
from 14.6% to 16.6%. Without the one-time software charge, the Company's selling
and administrative costs for the Second Quarter 2005 would have been 15.3%.
Fixed costs being spread over a lower sales volume also contributed to the
increase in this percentage.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
Interest expense decreased to $18,998 in the Second Quarter 2005 from $28,308 in
the Second Quarter 2004, mostly because of the interest on the Fleetwood
liability that was accruing during the Second Quarter 2004 that the Company did
not incur in the same period of the current year.
Net income decreased to $241,317 in the Second Quarter 2005 compared to $538,612
in the Second Quarter 2004. This decrease is the result of reduced sales, a
lower gross profit percentage on sales, and the one-time charge for the disposal
of the Company's financial software package. Diluted earnings per share
decreased from $0.18 per share during the Second Quarter 2004 to $0.08 per share
during the Second Quarter 2005.
TWENTY-SIX WEEK PERIOD ENDED JULY 2, 2005, (FIRST SIX MONTHS 2005) COMPARED TO
TWENTY-SIX WEEK PERIOD ENDED JULY 3, 2004, (FIRST SIX MONTHS 2004)
The following table shows a comparison of the results of operations between
First Six Months 2005 and First Six Months 2004:
FIRST FIRST
SIX MONTHS % SIX MONTHS % $ INCREASE
2005 OF SALES 2004 OF SALES (DECREASE) % CHANGE
------------ -------- ------------ -------- ----------- --------
Net Sales $ 25,707,334 100% $ 27,112,878 100% $(1,405,544) -5.2%
Cost of Products Sold 20,517,235 79.8% 21,857,867 80.6% (1,340,632) -6.1%
------------ ---- ------------ ---- -----------
Gross Profit 5,190,099 20.2% 5,255,011 19.4% (64,912) -1.2%
Selling and Administrative Expenses 4,146,408 16.1% 4,036,921 14.9% 109,487 2.7%
------------ ---- ------------ ---- -----------
Operating Income 1,043,691 4.1% 1,218,090 4.5% (174,399) -14.3%
Other Income (Expense)
Interest, Investment and
Other Income 40,159 0.2% 53,476 0.2% (13,317) -24.9%
Interest Expense (41,197) -0.2% (55,070) -0.2% 13,873 -25.2%
------------ ---- ------------ ---- -----------
Earnings Before Income Taxes 1,042,653 4.1% 1,216,496 4.5% (173,843) -14.3%
Provision for Income Taxes 383,000 1.5% 477,000 1.8% (94,000) -19.7%
------------ ---- ------------ ---- -----------
NET INCOME $ 659,653 2.6% $ 739,496 2.7% $ (79,843) -10.8%
============ ==== ============ ==== ===========
Net sales for the First Six Months 2005 were $25,707,334, compared to
$27,112,878 for the same period in the previous year, a 5.2% decrease. This is
due to a 15.3% drop in sales to the Company's recreational vehicle customers,
partially offset by increases of 5.2% and 17.6% to the Company's manufactured
housing and hospitality customers, respectively. The recreational vehicle
industry reported mixed results for the first half of 2005, with travel trailer
shipments increasing by 3.4% and motor home shipments decreasing by 12.7% from a
year earlier. Total combined recreational vehicle industry shipments increased
0.3% for the first six months. The manufactured housing industry reported that
shipments for the first half of 2005 increased by 3.4% compared to the same
period of the prior year.
Cost of products sold decreased to 79.8% in the First Six Months 2005 compared
to 80.6% a year ago. The major reasons for the decrease in this percentage were
the higher costs of production during the prior year at the Douglas, Georgia
facility acquired from Fleetwood and the transition costs incurred by the
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
Company to re-distribute most of the acquired business to its other facilities
during the prior year. Without these expenses, the cost of goods sold percentage
would have been 79.1% for the First Six Months 2004.
Selling and administrative expenses were $4,146,408 in the First Six Months 2005
versus $4,036,921 in the First Six Months 2004. The percentage of selling and
administrative expenses to net sales increased from 14.9% to 16.1%. This was
partially due to a one-time $165,647 pretax charge resulting from the Company's
decision to convert its ERP system to a different software platform. Without
this charge, selling and administrative expenses as a percentage of sales would
have been 15.5%. Excluding the software conversion, the reason for the increase
was due to fixed expenses being spread over a lower sales volume.
Net income decreased to $659,653 in the First Six Months 2005 compared to
$739,496 in the First Six Months 2004, a decrease of 10.8%. This decrease is
largely due to a lower sales volume as well as the one-time charge for the
disposal of the Company's financial software package. Diluted earnings per share
decreased from $0.25 for the first half of fiscal 2004 compared to $0.22 for the
same period of the current year.
EBITDA
EBITDA represents income before income taxes, interest expense, depreciation and
amortization, and gain or loss on disposal of assets. EBITDA is an approximation
of cash flow from operations before tax. The Company uses EBITDA as an internal
measure of performance and believes it is a useful and commonly used measure of
financial performance in addition to income before taxes and other profitability
measures under Generally Accepted Accounting Principles ("GAAP").
EBITDA is not a measure of performance under GAAP. EBITDA should not be
construed as an alternative to operating income and income before taxes as an
indicator of the Company's operations in accordance with GAAP. Nor is EBITDA an
alternative to cash flow from operating activities in accordance with GAAP. The
Company's definition of EBITDA can differ from that of other companies.
The following table reconciles Net Income, the most comparable measure under
GAAP, to EBITDA for the thirteen week and twenty-six week periods ended July 2,
2005 and July 3, 2004:
FOR THE THIRTEEN WEEKS ENDED FOR THE TWENTY-SIX WEEKS
----------------------------- -------------------------------
JULY 2, 2005 JULY 3, 2004 JULY 2, 2005 JULY 3, 2004
------------ ------------ ------------ ------------
Net Income $241,317 $ 538,612 $ 659,653 $ 739,496
Add:
Interest 18,998 28,308 41,197 55,070
Taxes 148,000 349,000 383,000 477,000
Depreciation & Amortization 367,778 359,143 733,110 673,901
Loss (Gain) on Disposal of Assets 154,915 -- 160,622 (584)
-------- ---------- ---------- -----------
EBITDA $931,008 $1,275,063 $1,977,582 $ 1,944,883
======== ========== ========== ===========
9
ITEM 4. CONTROLS AND PROCEDURES.
(a) The Company's principal executive officer and principal financial officer
have reviewed the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) as of July 2, 2005 and have
concluded that they were adequate and effective.
(b) During the most recent fiscal quarter, there were no changes in the
Company's internal control over financial reporting identified in connection
with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or
15d-15 that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
31.1 - Certification of Chief Executive Officer and President
31.2 - Certification of Chief Financial Officer
32 - Certificate required by 18 U.S.C.ss.1350.
(b) The Company filed a report on Form 8-K on May 9, 2005 for the
purpose of furnishing the Company's May 9, 2005 press release
announcing the results for the fiscal quarter ended April 2, 2005.
10
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: August 12, 2005 By: /s/ William A. Bassett
------------------
William A. Bassett,
Chief Executive Officer and President
Date: August 12, 2005 By: /s/ Michael K. Solomon
------------------
Michael K. Solomon,
Chief Financial Officer
11