UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 2003
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 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 May 12, 2003
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Common Stock, Par Value $.20 Per Share 2,792,878
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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DECORATOR INDUSTRIES, INC
BALANCE SHEETS
ASSETS March 29, December 28,
------ 2003 2002
----------- -----------
(UNAUDITED)
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,125,163 $ 2,117,762
Accounts Receivable, less allowance for
doubtful accounts ($214,012 and $202,933) 3,995,744 3,414,629
Inventories 3,758,607 4,388,070
Other Current Assets 297,433 419,620
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TOTAL CURRENT ASSETS 10,176,947 10,340,081
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Property and Equipment
Land, Buildings & Improvements 5,045,858 5,043,458
Machinery, Equipment, Furniture & Fixtures 5,610,900 5,585,401
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Total Property and Equipment 10,656,758 10,628,859
Less: Accumulated Depreciation and Amortization 4,800,138 4,640,040
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Net Property and Equipment 5,856,620 5,988,819
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Goodwill, less accumulated Amortization of $1,348,569 2,731,717 2,731,717
Other Assets 547,533 419,517
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TOTAL ASSETS $19,312,817 $19,480,134
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LIABILITIES & STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts Payable $ 2,167,532 $ 2,059,871
Current Maturities of Long-term Debt 127,123 126,750
Accrued Expenses:
Income taxes 43,910 --
Compensation 631,879 856,786
Other 890,715 1,105,646
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TOTAL CURRENT LIABILITIES 3,861,159 4,149,053
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Long-Term Debt 1,446,187 1,477,973
Deferred Income Taxes 507,000 505,000
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TOTAL LIABILITIES 5,814,346 6,132,026
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Stockholders' Equity
Common Stock $.20 par value: Authorized shares, 10,000,000;
Issued shares, 4,485,635 897,127 897,127
Paid-in Capital 1,425,983 1,425,826
Retained Earnings 19,490,347 19,349,984
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21,813,457 21,672,937
Less: Treasury stock, at cost: 1,692,852 and 1,694,856 shares 8,314,986 8,324,829
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TOTAL STOCKHOLDERS' EQUITY 13,498,471 13,348,108
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $19,312,817 $19,480,134
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The accompanying notes are an integral part of the financial statements.
1
DECORATOR INDUSTRIES, INC
STATEMENTS OF EARNINGS
(UNAUDITED)
For the Thirteen Weeks Ended
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March 29, 2003 March 30, 2002
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Net Sales $ 9,779,753 100.00% $ 8,918,133 100.00%
Cost of Products Sold 7,709,701 78.83% 7,013,399 78.64%
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Gross Profit 2,070,052 21.17% 1,904,734 21.36%
Selling and Administrative Expenses 1,560,724 15.96% 1,404,517 15.75%
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Operating Income 509,328 5.21% 500,217 5.61%
Other Income (Expense)
Interest and Investment Income 9,481 0.10% 12,694 0.14%
Interest Expense (3,934) -0.04% (7,770) -0.09%
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Earnings Before Income Taxes 514,875 5.27% 505,141 5.66%
Provision for Income Taxes 207,000 2.12% 200,000 2.24%
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NET INCOME $ 307,875 3.15% $ 305,141 3.42%
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EARNINGS PER SHARE
BASIC $ 0.11 $ 0.11
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DILUTED $ $ 0.11 $ 0.11
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Weighted Average Number of Shares Outstanding
Basic 2,791,226 2,812,826
Diluted 2,807,647 2,820,594
The accompanying notes are an integral part of the financial statements.
2
DECORATOR INDUSTRIES, INC
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Thirteen Weeks Ended
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March 29, 2003 March 30, 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 307,875 $ 305,141
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation and Amortization 176,311 159,165
Provision for Losses on Accounts Receivable 10,000 12,500
Deferred Taxes (4,000) 22,000
Loss on Disposal of Assets 9,119 --
Increase (Decrease) from Changes in:
Accounts Receivable (591,116) (19,404)
Inventories 629,463 176,770
Prepaid Expenses (13,811) (29,383)
Other Assets (128,016) (31,060)
Accounts Payable 107,661 303,279
Accrued Expenses (337,715) (136,319)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 165,771 762,689
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (53,231) (32,532)
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NET CASH USED IN INVESTING ACTIVITIES (53,231) (32,532)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term Debt Payments (31,413) (26,165)
Dividend Payments (83,726) (84,355)
Issuance of Stock for Directors Trust 10,000 10,000
Purchase of Common Stock for Treasury -- (58,524)
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NET CASH USED IN FINANCING ACTIVITIES (105,139) (159,044)
Net Increase in Cash and Cash Equivalents 7,401 571,113
Cash and Cash Equivalents at Beginning of Year 2,117,762 2,319,568
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,125,163 $ 2,890,681
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Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Interest $ 6,289 $ 7,873
Income Taxes $ 25,091 $ 68,721
Supplemental schedule of noncash activities:
During the First Quarter of 2003, the Company declared cash dividends of
$83,726, paid on March 14, 2003; and $83,786, which will be paid on June 13,
2003. The dividend payable on June 13, 2003 is included in Accrued Expenses:
Other in the accompanying Balance Sheet as of March 29, 2003.
The accompanying notes are an integral part of the financial statements.
3
DECORATOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
THIRTEEN WEEKS ENDED MARCH 29, 2003 AND MARCH 30, 2002
(UNAUDITED)
NOTE 1. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
Company's financial position as of March 29, 2003, the changes therein
for the thirteen week period then ended and the results of operations
for the thirteen week periods ended March 29, 2003 and March 30, 2002.
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
December 28, 2002. The results of operations for the thirteen week
periods ended March 29, 2003 and March 30, 2002 are not necessarily
indicative of operating results for the full year.
NOTE 3. INVENTORIES
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Inventories at March 29, 2003 and December 28, 2002 consisted of the
following:
March 29, 2003 December 28, 2002
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Raw Material and supplies $3,281,188 $3,944,768
In Process and Finished Goods 477,419 443,302
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Total Inventory $3,758,607 $4,388,070
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NOTE 4. EARNINGS PER SHARE
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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
March 29, 2003 March 30, 2002
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Numerator:
Net income $ 307,875 $ 305,141
========== ==========
Denominator:
Weighted-average number of
common shares outstanding 2,791,226 2,812,826
Dilutive effect of
stock options on net income 16,421 7,768
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2,807,647 2,820,594
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Diluted earnings per share: $ 0.11 $ 0.11
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Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations.
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Cautionary Statement: This Quarterly Report on Form 10-Q may contain statements
relating to future events, including results of operations, that are considered
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements represent the
Company's expectations or belief as to future events and, by their very nature,
are subject to risks and uncertainties which may result in actual events
differing materially from those anticipated. In particular, future operating
results and future liquidity will be affected by the level of demand for
recreational vehicles, manufactured housing and hotel/motel accommodations and
may be affected by changes in economic conditions, interest rate fluctuations,
competitive products and pricing pressures within the Company's markets, the
Company's ability to contain its manufacturing costs and expenses, and other
factors. Forward-looking statements by the Company speak only as of the date
made, and the Company undertakes no obligation to update or revise such
statements to reflect events or circumstances after such date or to reflect the
occurrence of unanticipated events.
FINANCIAL CONDITION
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The Company's financial condition, as measured by the following ratios,
continues to be strong at the end of the First Quarter 2003.
March 29, 2003 December 28, 2002
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Current Ratio 2.64 2.49
Quick Ratio 1.66 1.43
LT Debt to Total Capital 9.68% 9.97%
Working Capital $6,315,788 $6,191,028
Days sales outstanding in accounts receivable were 36.3 days at March 29, 2003
compared to 32.3 days at December 28, 2002, and net accounts receivable
increased by 17.0%. Inventories decreased by 14.3% during the quarter.
Management does not foresee any events which will adversely affect its liquidity
during 2003. At the quarter end, the Company had no borrowings against its
$5,000,000 revolving line of credit. With the available borrowing capacity and
the Company's cash balances, the financial condition is more than adequate to
finance internal growth and the acquisitions of businesses.
5
Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations. (continued)
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RESULTS OF OPERATIONS
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The following tables show the percentage relationship to net sales of certain
items in the Company's Statements of Earnings:
First First
Quarter Quarter
2003 2002
---- ----
Earnings Ratios
---------------
Net sales 100.0% 100.0%
Cost of products sold 78.8 78.6
Selling and administrative 16.0 15.8
Interest and investment income (0.1) (0.1)
Interest expense 0.0 0.1
Income taxes 2.1 2.2
Net earnings 3.2 3.4
THIRTEEN WEEK PERIOD ENDED MARCH 29, 2003, (FIRST QUARTER 2003) COMPARED TO
THIRTEEN WEEK PERIOD ENDED MARCH 30, 2002, (FIRST QUARTER 2002)
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Net sales for the First Quarter 2003 were $9,779,753, compared to $8,918,133 for
the same period in the previous year, a 9.7% increase. The Company experienced
increased sales in the recreational vehicle and hospitality markets, while sales
decreased in the manufactured housing market.
Cost of products sold increased to 78.8% in the First Quarter 2003 compared to
78.6% a year ago. A somewhat negative impact from product mix was mostly offset
by fixed expenses being spread over higher volumes.
Selling and administrative expenses were $1,560,724 in the First Quarter 2003
versus $1,404,517 in the First Quarter 2002. This increase resulted from higher
accruals for performance bonuses, higher commissions from increased hospitality
sales, and charges related to the ongoing implementation of an
Enterprise-Resource-Planning system.
Interest expense decreased to $3,934 in the First Quarter 2003 from $7,770 in
the First Quarter 2002 because of reduced borrowings and lower interest rates.
Net income increased to $307,875 in the First Quarter of 2003 compared to
$305,141 in the First Quarter of 2002. This increase is largely the result of
increased sales, partially offset by increased administrative expenses.
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Item 4. Controls and Procedures.
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(a) The Company's Chief Executive Officer (CEO) and Chief Financial Officer
(CFO) have reviewed the effectiveness of the Company's disclosure
controls and procedures as defined in Exchange Act Rules 13a-14(c) and
15d-14(c) within 90 days of the date of this report. These officers
have concluded that the Company's disclosure controls and procedures
were adequate and effective to ensure that material information
relating to the financial statements has been disclosed.
(b) There were no significant changes in the Company's internal controls or
in other factors that could significantly affect the Company's internal
controls and procedures subsequent to the review date, nor any
significant deficiencies or material weaknesses in such internal
controls and procedures requiring corrective actions.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits:
99.1 - Certification of President
99.2 - Certification of Treasurer
99.3 - Certificate required by 18 U.S.C.ss.1350.
(b) No reports on Form 8-K were filed by the Company during the
quarterly period ended March 29, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DECORATOR INDUSTRIES, INC.
(Registrant)
Date: May 12, 2003 By: /s/ William A. Bassett
-------------------------
William A. Bassett, President
Date: May 12, 2003 By: /s/ Michael K. Solomon
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Michael K. Solomon, Treasurer
7