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 1, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-7753
DECORATOR INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 25-1001433
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10011 Pines Blvd., Suite #201, Pembroke Pines, Florida 33024
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 436-8909
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
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 4, 2000
------------------- -----------------------------
Common Stock, Par Value $.20 Per Share 3,140,365
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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DECORATOR INDUSTRIES, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
July 1, 2000 Jan. 1, 2000
------------ ------------
ASSETS (UNAUDITED)
------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 1,284,128 $ 484,328
Short-term Investments -- 1,455,796
Accounts Receivable, less allowance for
doubtful accounts ($223,789 and $158,996) 5,120,995 3,725,556
Inventories 6,852,365 5,739,303
Other Current Assets 652,814 372,258
----------- -----------
Total Current Assets 13,910,302 11,777,241
Property and Equipment:
Land, Buildings & Improvements 4,137,916 4,123,189
Machinery, Equipment, Furniture and Fixtures 5,135,342 4,808,280
----------- -----------
Total Property and Equipment 9,273,258 8,931,469
Less: Accumulated Depreciation and Amortization 3,400,280 3,104,989
----------- -----------
Net Property and Equipment 5,872,978 5,826,480
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Goodwill, less accumulated
amortization of $1,211,660 and $1,189,871 3,031,126 3,648,965
Other Assets 317,226 412,837
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Total Assets $23,131,632 $21,665,523
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current Liabilities:
Accounts Payable $ 4,687,195 $ 3,100,681
Current Maturities of Long-term Debt 102,791 103,871
Accrued Expenses:
Income Taxes -- --
Compensation 936,965 1,278,660
Other 1,058,095 647,173
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Total Current Liabilities 6,785,046 5,130,385
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Long-Term Debt 1,760,064 1,814,169
Deferred Income Taxes 370,000 356,000
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Total Liabilities 8,915,110 7,300,554
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Stockholders' Equity
Common stock $.20 par value: Authorized shares, 10,000,000;
Issued shares, 4,444,997 and 4,408,831 888,999 881,766
Paid-in Capital 1,441,336 1,427,788
Retained Earnings 18,563,019 18,368,158
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20,893,354 20,677,712
Less: Treasury stock, at cost: 1,292,366 and 1,219,801 shares 6,676,832 6,312,743
----------- -----------
Total Stockholders' Equity 14,216,522 14,364,969
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Total Liabilities and Stockholders' Equity $23,131,632 $21,665,523
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
DECORATOR INDUSTRIES, INC.
STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THIRTEEN WEEKS ENDED: FOR TWENTY-SIX WEEKS ENDED:
---------------------------------------------- --------------------------------------------
July 1, 2000 July 3, 1999 July 1, 2000 July 3, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $12,698,229 100.00% $13,971,826 100.00% $25,783,687 100.00% $26,823,509 100.00%
Cost of products sold 9,935,319 78.24% 10,812,044 77.38% 20,288,693 78.69% 20,798,321 77.54%
----------- ----------- ----------- -----------
Gross profit 2,762,910 21.76% 3,159,782 22.62% 5,494,994 21.31% 6,025,188 22.46%
Selling and
Administrative expenses 1,962,759 15.46% 1,824,736 13.06% 3,701,307 14.36% 3,570,245 13.31%
----------- ----------- ----------- -----------
Operating income 800,151 6.30% 1,335,046 9.56% 1,793,687 6.95% 2,454,943 9.15%
Interest and
investment income 24,623 (0.19%) 12,950 (0.09%) 43,260 (0.17%) 30,857 (0.12%)
Interest expense (26,302) 0.20% (23,686) 0.17% (46,482) 0.18% (28,214) 0.11%
----------- ----------- ----------- -----------
Earnings before 798,472 6.29% 1,324,310 9.48% 1,790,465 6.94% 2,457,586 9.16%
income taxes
Provision for income taxes 301,000 2.37% 501,000 3.59% 673,000 2.61% 929,000 3.46%
----------- ----------- ----------- -----------
Continuing operations 497,472 3.92% 823,310 5.89% 1,117,465 4.33% 1,528,586 5.70%
Discontinued operations:
Income (loss) from operations, net
of income
tax provision (benefit) of
$(9,000), $13,000,
$(33,000) and $11,000 (16,267) (.13%) 21,369 .15% (55,315) (.21%) 19,109 .07%
Loss on disposal, net of income
tax benefit of $259,000 (422,481) (3.33%) (422,481) (1.64%)
---------- ----------- ---------- -----------
Net Income $ 58,724 0.46% $844,679 6.04% $ 639,669 2.48% $ 1,547,695 5.77%
========== =========== ========== ===========
Earnings per share:
Continuing Operations $ 0.16 $ 0.24 $ 0.35 $ 0.44
========== =========== ========== ===========
Discontinued Operations $ (0.14) $ 0.01 $ (0.15) $ 0.01
========== =========== ========== ===========
Basic $ 0.02 $ 0.25 $ 0.20 $ 0.45
========== =========== ========== ===========
Diluted $ 0.02 $ 0.24 $ 0.20 $ 0.43
=========== =========== =========== ===========
Weighted-average number of shares outstanding:
Basic 3,165,186 3,418,314 3,172,610 3,472,609
Diluted 3,199,699 3,575,523 3,211,131 3,634,857
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
DECORATOR INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR TWENTY-SIX WEEKS ENDED:
July 1, 2000 July 3, 1999
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 639,669 $ 1,547,695
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 374,327 324,108
Write-off of goodwill 565,481 --
Provision for losses on accounts receivable 63,433 26,000
Deferred taxes (10,000) 14,000
(Gain) loss on disposal of assets (114) (1,137)
(Increase) decrease in accounts receivable (1,458,872) (1,307,927)
(Increase) decrease in inventories (1,113,062) 347,073
(Increase) decrease in prepaid expenses (256,556) 25,668
(Increase) decrease in other assets 96,566 122,083
Increase (decrease) in accounts payable 1,586,514 1,534,012
Increase (decrease) in accrued expenses 69,228 (129,611)
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Net Cash Provided by Operating Activities 556,614 2,501,964
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Cash Flows From Investing Activities:
Capital expenditures (360,483) (1,689,760)
Proceeds from property dispositions 675 6,100
Short-term investments 1,455,796 (992,669)
Net cash paid for acquisitions (9,498) (392,638)
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Net Cash Provided by (Used in) Investing Activities 1,086,490 (3,068,967)
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Cash Flows From Financing Activities:
Long-term debt payments (55,185) (39,724)
Dividend payments (444,809) (485,140)
Proceeds on debt from new building -- 1,397,667
Proceeds from exercise of stock options 21,460 18,833
Purchase of common stock for treasury (384,770) (1,599,808)
Issuance of stock for director's compensation 20,000 25,738
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Net Cash Used in Financing Activities (843,304) (682,434)
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Net increase (decrease) in cash and cash equivalents 799,800 (1,249,437)
Cash and cash equivalents at beginning of year 484,328 2,633,999
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Cash and Cash Equivalents at End of Period $ 1,284,128 $ 1,384,562
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 40,092 $ 25,268
Income taxes $ 569,545 $ 612,375
Cash flows from acquisitions:
Purchase price $ 9,498 $ 392,638
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
DECORATOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
TWENTY-SIX WEEKS ENDED JULY 1, 2000 AND JULY 3, 1999
(UNAUDITED)
NOTE 1. In the opinion of management, the accompanying unaudited
financial statements contain all adjustments necessary to
present fairly the Company's financial position as of July 1,
2000, the changes therein for the twenty-six week period then
ended and the results of operations for the twenty-six week
periods ended July 1, 2000 and July 3, 1999.
NOTE 2. The financial statements included in the Form 10-Q are
presented in accordance with the requirements of the form and
do not include all of the disclosures required by generally
accepted accounting principles. For additional information,
reference is made to the Company's annual report on Form 10-K
for the year ended January 1, 2000. The results of operations
for the twenty-six week periods ended July 1, 2000 and July 3,
1999 are not necessarily indicative of operating results for
the full year. Certain numbers from prior periods have been
reclassified for comparative purposes.
NOTE 3. INVENTORIES
Inventories at July 1, 2000 and January 1, 2000 consisted of
the following:
July 1, 2000 January 1, 2000
------------ ---------------
Raw Material
and Supplies $ 6,278,612 $ 5,363,747
In Process and
Finished Goods 573,753 375,556
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Total Inventory $ 6,852,365 $ 5,739,303
============ ===========
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.
<TABLE>
<CAPTION>
Thirteen weeks ended: Twenty-six weeks ended:
-------------------------- ---------------------------
July 1, 2000 July 3, 1999 July 1, 2000 July 3, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Net income $ 58,724 $ 844,679 $ 639,669 $1,547,695
========== ========== ========== ==========
Denominator:
Weighted-average number
of common shares
outstanding 3,165,186 3,418,314 3,172,610 3,472,609
Dilutive effect of
stock options on net
income 34,513 157,209 38,521 162,248
---------- ---------- ---------- -----------
3,199,699 3,575,523 3,211,131 3,634,857
========== ========== ========== ===========
Diluted earnings per
share: $ 0.02 $ 0.24 $ 0.20 $ 0.43
========== ========== ========== ===========
</TABLE>
4
<PAGE>
DECORATOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
TWENTY-SIX WEEKS ENDED JULY 1, 2000 AND JULY 3, 1999
(UNAUDITED)
NOTE 5. DISCONTINUED OPERATIONS
During the second quarter of the current year, the Company
adopted a plan to dispose of its contract sewing operations
through liquidation. At July 1, the net assets of these
operations consisted primarily of goodwill ($565,481),
inventories, machinery and equipment, and trade receivables.
Included in the loss on disposal is a pretax provision of
$60,000 for estimated operating losses during the phase-out
period.
5
<PAGE>
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 Second Quarter 2000.
<TABLE>
<CAPTION>
July 1, 2000 January 1, 2000
------------ ---------------
<S> <C> <C>
Current Ratio 2:05 2:30
Quick Ratio 1:04 1:18
LT Debt to Total Capital 11.02% 11.21%
Working Capital $7,125,256 $6,646,856
</TABLE>
Days sales outstanding in accounts receivable were 35.8 days at July 1, 2000
compared to 32.9 days at July 3 , 1999. Working capital increased by $478,400
and was used for the purchase of Common Stock for Treasury ($384,770) and
capital expenditures ($360,483) during 2000.
Cash and Short-Term Investments totaled $1,284,128 at July 1, 2000. Management
does not foresee any events which will adversely affect its liquidity during
2000. On April 19, 2000 the Company signed an agreement for a $5,000,000
revolving line of credit. With this credit line in place and the Company's cash
balances the financial condition is more than adequate to finance internal
growth and 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:
<TABLE>
<CAPTION>
Second Second
Quarter Quarter YTD YTD
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings Ratios
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 78.24 77.38 78.69 77.54
Selling and administrative 15.46 13.06 14.36 13.31
Interest and investment income (0.19) (0.09) (0.17) (0.12)
Interest expense 0.20 0.17 0.18 0.11
Income taxes 2.37 3.59 2.61 3.46
Discontinued operations (3.46) 0.15 (1.85) 0.07
Net income 0.46 6.04 2.48 5.77
</TABLE>
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations. (Continued)
-------------
Thirteen Week Period Ended July 1, 2000 (Second Quarter 2000) compared to
Thirteen Week Period Ended July 3, 1999 (Second Quarter 1999)
--------------------------------------- ---------------------
Net sales for the Second Quarter 2000 were $12,698,229, compared to $13,971,826
for the same period the previous year, a 9.1% decrease. This decrease was
largely the result of the continued slowdown in the manufactured housing market
and a slight decrease in sales to the recreational vehicle industry. The
Company's sales to the hospitality market increased during this period.
Cost of products sold increased to 78.2% in the Second Quarter 2000 compared to
77.4% a year ago. This increase is attributable to increased material and labor
costs and fixed expenses for manufactured housing being absorbed over a smaller
sales volume.
Selling and administrative expenses were $1,962,759 in the Second Quarter 2000
versus $1,824,736 in the Second Quarter 1999. This increase is attributable to
the increased commission cost associated with the hospitality market.
Net income decreased to $58,724 from $844,679 for the same period a year ago. As
discussed in Note 5 of the financial statements, the current quarter's income
was decreased by a charge of $438,748 (net of tax) for the discontinued
operations of a business unit. Earnings per share from continued operations
decreased to 16 cents per share or $497,472 from 24 cents and $823,310 in the
second quarter of last year.
Twenty-six Week Period Ended July 1, 2000 (First Six Months of 2000) compared to
Twenty-six Week Period Ended July 3, 1999 (First Six Months of 1999)
---------------------------------------------------------------------
Net sales for the first six months 2000 were $25,783,687, down from $26,823,509
in the prior year, a 3.9% decrease. The decrease comes from the ongoing slowdown
in the manufactured housing market, caused by an excess dealer inventory.
Cost of products sold increased to 78.7% in the first six months of 2000
compared to 77.5% a year ago. The increase is the result of allocating the fixed
expenses for manufactured housing over a smaller sales volume.
Selling and administrative expenses were $3,701,307 in the first six months of
2000 versus $3,570,245 in the first six months of 1999. This increase is
attributable to the increased commission cost associated with the hospitality
market.
Net income for the six months decreased to $639,669 or 20 cents per share
(diluted) compared to $1,547,695 or 43 cents per share (diluted) in the same
period of 1999. As discussed in Note 5 of the financial statements, net income
was reduced by $477,796 (net of tax) due to the discontinuance of contract
sewing operations.
7
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits:
---------
27N - Financial data schedule, filed herewith.
(b) No reports on Form 8-K were filed by the Company during the
quarterly period ended July 1, 2000.
8
<PAGE>
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 4, 2000 By: /s/ William A. Bassett
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William A. Bassett, President
Date: August 4, 2000 By: /s/ Michael K. Solomon
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Michael K. Solomon, Treasurer
9
