-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BVIOjjGvf3meeLl1BP6pa+XrHBiCk4mVw0+itNeJpI+n+pz/jtBHpZ1KT41z+nBv PrrASVac2f8sRsBfoSo2YQ== 0001116502-04-002728.txt : 20041116 0001116502-04-002728.hdr.sgml : 20041116 20041116132421 ACCESSION NUMBER: 0001116502-04-002728 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041002 FILED AS OF DATE: 20041116 DATE AS OF CHANGE: 20041116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DECORATOR INDUSTRIES INC CENTRAL INDEX KEY: 0000027613 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED TEXTILE PRODUCTS [2390] IRS NUMBER: 251001433 STATE OF INCORPORATION: PA FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07753 FILM NUMBER: 041148834 BUSINESS ADDRESS: STREET 1: 10011 PINES BLVD SUITE 201 CITY: PEMBROKE PINES STATE: FL ZIP: 33024 BUSINESS PHONE: 3054368909 10-Q 1 decorator10q.txt QUARTERLY REPORT 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 October 2, 2004 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 November 16, 2004 ------------------- -------------------------------- Common Stock, Par Value $.20 Per Share 2,824,235 shares PART I - FINANCIAL INFORMATION Item 1. Financial Statements. DECORATOR INDUSTRIES, INC BALANCE SHEETS
ASSETS October 2, January 3, 2004 2004 ----------- ----------- (UNAUDITED) Current Assets: Cash and Cash Equivalents $ 114,032 $ 3,991,631 Accounts Receivable, less allowance for doubtful accounts ($200,202 and $200,598) 4,569,218 3,519,418 Inventories 5,635,021 4,123,397 Other Current Assets 408,916 274,285 ----------- ----------- Total Current Assets 10,727,187 11,908,731 ----------- ----------- Property and Equipment Land, Buildings & Improvements 7,241,898 5,114,341 Machinery, Equipment, Furniture & Fixtures 6,455,589 6,064,877 ----------- ----------- Total Property and Equipment 13,697,487 11,179,218 Less: Accumulated Depreciation and Amortization 5,724,738 5,157,452 ----------- ----------- Net Property and Equipment 7,972,749 6,021,766 ----------- ----------- Goodwill, less accumulated Amortization of $1,348,569 2,731,717 2,731,717 Identifiable intangible asset, less accumulated Amortization of $519,000 4,032,323 -- Other Assets 260,484 426,108 ----------- ----------- Total Assets $25,724,460 $21,088,322 =========== =========== LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 3,288,482 $ 1,878,683 Current Maturities of Long-term Debt 170,745 166,251 Accrued Expenses: Income Taxes 232,423 -- Compensation 1,008,020 940,158 Acquisition Liability 1,257,114 -- Other 1,454,007 915,777 ----------- ----------- Total Current Liabilities 7,410,791 3,900,869 ----------- ----------- Long-Term Debt 1,795,245 1,926,832 Deferred Income Taxes 662,000 646,000 ----------- ----------- Total Liabilities 9,868,036 6,473,701 ----------- ----------- Stockholders' Equity Common Stock $.20 par value: Authorized shares, 10,000,000; Issued shares (4,487,728 and 4,485,728) 897,546 897,146 Paid-in Capital 1,415,506 1,426,435 Retained Earnings 21,714,159 20,576,497 ----------- ----------- 24,027,211 22,900,078 Less: Treasury stock, at cost: 1,663,493 and 1,686,840 shares 8,170,787 8,285,457 ----------- ----------- Total Stockholders' Equity 15,856,424 14,614,621 ----------- ----------- Total Liabilities and Stockholders' Equity $25,724,460 $21,088,322 =========== ===========
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 Thirty-Nine Weeks Ended ---------------------------- ------------------------------- October 2, 2004 September 27, 2003 October 2, 2004 September 27, 2003 --------------- ------------------ --------------- ------------------ Net Sales $ 12,123,515 100.00% $10,984,598 100.00% $ 39,236,393 100.00% $ 31,531,366 100.00% Cost of Products Sold 9,587,728 79.08% 8,632,287 78.59% 31,034,588 79.10% 24,658,537 78.20% ------------ ----------- ------------ ------------ Gross Profit 2,535,787 20.92% 2,352,311 21.41% 8,201,805 20.90% 6,872,829 21.80% Selling and Administrative Expenses 1,908,195 15.74% 1,677,318 15.27% 5,885,577 15.00% 4,878,209 15.47% ------------ ----------- ------------ ------------ Operating Income 627,592 5.18% 674,993 6.14% 2,316,228 5.90% 1,994,620 6.33% Other Income (Expense) Interest and Investment Income 20,148 0.17% 35,258 0.32% 73,624 0.19% 77,220 0.24% Interest Expense (28,755) -0.24% (16,104) -0.14% (83,825) -0.21% (39,890) -0.13% ------------ ----------- ------------ ------------ Earnings Before Income Taxes 618,985 5.11% 694,147 6.32% 2,306,027 5.88% 2,031,950 6.44% Provision for Income Taxes 250,000 2.07% 275,000 2.50% 915,000 2.33% 807,000 2.56% ------------ ----------- ------------ ------------ Net Income $ 368,985 3.04% $ 419,147 3.82% $ 1,391,027 3.55% $ 1,224,950 3.88% ============ =========== ============ ============ EARNINGS PER SHARE Basic $ 0.13 $ 0.15 $ 0.49 $ 0.44 ============ =========== ============ ============ Diluted $ 0.12 $ 0.15 $ 0.47 $ 0.44 ============ =========== ============ ============ Weighted Average Number of Shares Outstanding Basic 2,820,107 2,795,166 2,813,256 2,793,207 Diluted 2,993,534 2,829,568 2,959,435 2,811,246
The accompanying notes are an integral part of the financial statements. 2 DECORATOR INDUSTRIES, INC STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Thirty-nine Weeks Ended ------------------------------- October 2, 2004 September 27, 2003 --------------- ------------------ Cash Flows From Operating Activities: Net Income $ 1,391,027 $ 1,224,950 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Depreciation and Amortization 1,103,252 525,261 Provision for Losses on Accounts Receivable -- 30,000 Deferred Taxes 13,000 87,000 (Gain) Loss on Disposal of Assets (62) 11,864 Increase (Decrease) from Changes in: Accounts Receivable (1,049,800) (1,226,026) Inventories (254,510) 201,767 Prepaid Expenses (131,631) (105,254) Other Assets 165,624 100,170 Accounts Payable 1,409,799 696,997 Accrued Expenses 838,515 99,100 ----------- ----------- Net Cash Provided by Operating Activities 3,485,214 1,645,829 ----------- ----------- Cash Flows From Investing Activities: Net cash paid for acquisitions (4,882,733) -- Capital Expenditures (2,209,615) (694,064) Proceeds from Property Dispositions 5,852 900 ----------- ----------- Net Cash Used in Investing Activities (7,086,496) (693,164) ----------- ----------- Cash Flows From Financing Activities: Long-term Debt Payments (127,093) (105,062) Dividend Payments (253,364) (251,359) Proceeds from Exercise of Stock Options 42,640 -- Issuance of Stock for Directors Trust 61,500 30,000 Proceeds on Debt from Building -- 640,000 ----------- ----------- Net Cash (Used in) Provided by Financing Activities (276,317) 313,579 Net (Decrease) Increase in Cash and Cash Equivalents (3,877,599) 1,266,244 Cash and Cash Equivalents at Beginning of Year 3,991,631 2,117,762 ----------- ----------- Cash and Cash Equivalents at End of Period $ 114,032 $ 3,384,006 =========== =========== Supplemental Disclosures of Cash Flow Information: Cash Paid for: Interest $ 39,646 $ 26,043 Income Taxes $ 663,869 $ 533,059
The accompanying notes are an integral part of the financial statements. 3 DECORATOR INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS THIRTY-NINE WEEKS ENDED OCTOBER 2, 2004 AND SEPTEMBER 27, 2003 (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 October 2, 2004, the changes therein for the thirty-nine week period then ended and the results of operations for the thirty-nine week periods ended October 2, 2004 and September 27, 2003. 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 3, 2004. The results of operations for the thirty-nine week periods ended October 2, 2004 and September 27, 2003 are not necessarily indicative of operating results for the full year. NOTE 3. INVENTORIES Inventories at October 2, 2004 and January 3, 2004 consisted of the following: October 2, 2004 January 3, 2004 --------------- --------------- Raw Material and supplies $4,990,694 $3,506,619 In Process and Finished Goods 644,327 616,778 ---------- ---------- Total Inventory $5,635,021 $4,123,397 ========== ========== 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 Thirty-Nine Weeks Ended ---------------------------- ------------------------------- October 2, 2004 September 27, 2003 October 2, 2004 September 27, 2003 --------------- ------------------ --------------- ------------------ Numerator: Net income $ 368,985 $ 419,147 $1,391,027 $1,224,950 ========== ========== ========== ========== Denominator: Weighted-average number of common shares outstanding 2,820,107 2,795,166 2,813,256 2,793,207 Dilutive effect of stock options on net income 173,427 34,402 146,179 18,039 ---------- ---------- ---------- ---------- 2,993,534 2,829,568 2,959,435 2,811,246 ========== ========== ========== ========== Diluted earnings per share: $ 0.12 $ 0.15 $ 0.47 $ 0.44 ========== ========== ========== ==========
4 NOTE 5. BUSINESS ACQUISITION On January 22, 2004, the Company entered into an agreement, effective January 26, 2004, to purchase the land, building, machinery, equipment, inventory and other assets of Fleetwood Enterprises Inc.'s ("Fleetwood") drapery operation in Douglas, Georgia for a purchase price of $4 million in cash, plus an additional amount for inventory of up to $1,257,114. Payment for the inventory is due to Fleetwood on January 24, 2005 and will include interest at 4%. In connection with the acquisition, the Company and Fleetwood entered into an agreement for the Company to be the exclusive supplier of Fleetwood's drapery, bedspread, and other decor requirements for a period of six years. If, at the end of three years, Fleetwood is satisfied with the Company's performance under this agreement, it will extend the terms of this agreement an additional three years. The acquired business was engaged in the manufacture of curtains, valances, bedspreads and other decor items. Fleetwood used the acquired business to supply most of its Manufactured Housing and some of its Recreational Vehicle requirements for these items. Sales to other customers were negligible. The Company has assigned the excess costs of this acquisition over the value of the asset acquired to an identifiable intangible asset. This intangible will be amortized over the life of the agreement with Fleetwood. The agreement to expand its relationship and become Fleetwood's exclusive supplier of the above mentioned products was the primary factor in compelling the Company to make the asset purchase. The asset is currently being amortized over six years. If the agreement is extended an additional three years, the intangible will be amortized over the nine year period. The remaining benefits of the agreement with Fleetwood exceed the remaining capitalized cost of the intangible asset. The Company is unable to provide meaningful pro-forma financial statements for this combination, because it is operating the business on a substantially different basis than its predecessor. The Company used internal funds for the purchase price paid at closing and will likely generate sufficient funds internally to satisfy the remaining obligation due in January 2005. At the date of closing, the Company's $5,000,000 line of credit was unused. The Company does expect to use its line of credit for working capital requirements during 2004. Fleetwood was the Company's largest customer in 2003, representing approximately 26% of total sales. The combined sales of the acquired business and the Company's to Fleetwood's Manufactured Housing and Recreational Vehicle businesses would have been approximately 36% of the Company's total sales in 2003. The total acquisition cost and liability is as follows: Total Acquisition Cost $6,139,847 Cash Paid through October 2, 2004 4,882,733 ---------- Acquisition Liability at October 2, 2004 $1,257,114 ========== 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. CAUTIONARY STATEMENT: THIS QUARTERLY REPORT ON FORM 10-Q MAY CONTAIN STATEMENTS RELATING TO FUTURE EVENTS, INCLUDING RESULTS OF OPERATIONS, THAT ARE CONSIDERED "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS REPRESENT THE COMPANY'S EXPECTATIONS OR BELIEF AS TO FUTURE EVENTS AND, BY THEIR VERY NATURE, ARE SUBJECT TO RISKS AND UNCERTAINTIES WHICH MAY RESULT IN ACTUAL EVENTS DIFFERING MATERIALLY FROM THOSE ANTICIPATED. IN PARTICULAR, FUTURE OPERATING RESULTS AND FUTURE LIQUIDITY WILL BE AFFECTED BY THE LEVEL OF DEMAND FOR RECREATIONAL VEHICLES, MANUFACTURED HOUSING AND HOTEL/MOTEL ACCOMMODATIONS AND MAY BE AFFECTED BY CHANGES IN ECONOMIC CONDITIONS, INTEREST RATE FLUCTUATIONS, COMPETITIVE PRODUCTS AND PRICING PRESSURES WITHIN THE COMPANY'S MARKETS, THE COMPANY'S ABILITY TO CONTAIN ITS MANUFACTURING COSTS AND EXPENSES, AND OTHER FACTORS. FORWARD-LOOKING STATEMENTS BY THE COMPANY SPEAK ONLY AS OF THE DATE MADE, AND THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE SUCH STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. FINANCIAL CONDITION The Company's financial ratios changed significantly as illustrated below. The financial condition remains strong, and the long-term debt to total capitalization ratio remained low at 10.17%
October 2, 2004 July 3, 2004 April 3, 2004 January 3, 2004 --------------- ------------ ------------- --------------- Current Ratio 1.45 1.58 1.48 3.05 Quick Ratio 0.69 0.82 0.76 2.00 LT Debt to Total Capital 10.17% 10.59% 11.18% 11.65% Working Capital $3,316,396 $4,341,863 $3,608,081 $8,007,862
The change in the Company's financial ratios reflects the acquisition in January 2004 of Fleetwood's drapery operation in Douglas, Georgia. The Company paid $4,000,000 at closing and on January 24, 2005 will pay up to $1,257,114, plus interest at 4%, for inventory purchased from Fleetwood. The Company used internal funds for the purchase price paid at closing and will likely generate sufficient funds to satisfy the remaining obligation. Days sales outstanding in accounts receivable were 33.5 days at October 2, 2004, compared to 37.3 days at September 27, 2003. Net accounts receivable decreased by $41,437 from September 27, 2003 to October 2, 2004, due to the improvement in days sales outstanding. Inventories increased by $1,448,718 from September 27, 2003 to October 2, 2004. This increase is attributable to the acquisition of the Fleetwood Drapery operation and to the overall increase in business. 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). Approved receivables were approximately $600,000 at the end of the third quarter. 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 6 all assigned receivables. Management believes this cost will be 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 will improve liquidity. Capital expenditures, excluding the assets acquired from Fleetwood, were $2,209,615 for the thirty-nine weeks ended October 2, 2004. This was primarily due to the purchase of a manufacturing facility in Phoenix, Arizona for $1,524,099, which closed in August 2004. The Company used its line of credit to finance a portion of this purchase. Also contributing to the increase in capital expenditures was $332,920 for a building addition to the Company's Elkhart, Indiana facility, which increased the Company's pleated shade capacity by 50%. As of October 2, 2004, the Company had no borrowings against its $5,000,000 line of credit. The opening of the Phoenix facility will not create a material adverse effect on the liquidity of the Company. The resources required for the operation will be similar to those required at the Company's other facilities. During its first periods of operations, this facility will negatively affect the financial performance of the Company. A positive contribution should be realized sometime during 2005. Management does not foresee any events which will adversely affect its liquidity during 2004. RESULTS OF OPERATIONS The following tables show the percentage relationship to net sales of certain items in the Company's Statements of Earnings:
Third Third Quarter Quarter YTD YTD Earnings Ratios 2004 2003 2004 2003 --------------- ------------ ------------- ------------- ------------ Net sales 100.0% 100.0% 100.0% 100.0% Cost of products sold 79.08 78.59 79.10 78.20 Gross margin 20.92 21.41 20.90 21.80 Selling and administrative 15.74 15.27 15.00 15.47 Interest and investment income (0.17) (0.32) (0.19) (0.24) Interest expense 0.24 0.14 0.21 0.13 Income taxes 2.07 2.50 2.33 2.56 Net income 3.04 3.82 3.55 3.88
THIRTEEN WEEK PERIOD ENDED OCTOBER 2, 2004, (THIRD QUARTER 2004) COMPARED TO THIRTEEN WEEK PERIOD ENDED SEPTEMBER 27, 2003, (THIRD QUARTER 2003) Net sales for the Third Quarter 2004 were $12,123,515, compared to $10,984,598 for the same period in the previous year, a 10.4% increase. Excluding sales arising from the acquisition of Fleetwood's drapery operation, net sales of existing business were virtually flat. Sales to the Company's recreational vehicle customers increased about 11.3% compared to the same period of the prior year, partially due to the additional Fleetwood business. Sales to the Company's manufactured housing customers increased by 27.4%, due to the additional Fleetwood business. Sales to the Company's hospitality customers decreased about 6.4% for the quarter ended October 2, 2004 compared to the same quarter of the prior year. 7 Cost of products sold increased to $9,587,728, or 79.1% in the Third Quarter 2004, compared to $8,632,287, or 78.6% in the Third Quarter 2003. Selling and administrative expenses were $1,908,195 in the Third Quarter 2004 versus $1,677,318 in the Third Quarter 2003. The increase is largely due to expenses associated with the Fleetwood acquisition, including amortization of the intangible asset of $187,500. As a percentage of sales, selling and administrative expenses increased from 15.3% to 15.7%. Excluding the amortization of the intangible asset, selling and administrative expenses as a percentage of sales would have decreased to 14.2% in the Third Quarter 2004. Interest expense increased to $28,755 in the Third Quarter 2004 from $16,104 in the Third Quarter 2003 mostly due to interest on the inventory purchased from Fleetwood in January 2004. Net income decreased to $368,985 in the Third Quarter of 2004 compared to $419,147 in the Third Quarter of 2003, a decrease of 12.0%. This decrease is largely the result of increased administrative expenses, and a small increase in the cost of products sold percentage. THIRTY-NINE WEEK PERIOD ENDED OCTOBER 2, 2004, (FIRST NINE MONTHS 2004) COMPARED TO THIRTY-NINE WEEK PERIOD ENDED SEPTEMBER 27, 2003, (FIRST NINE MONTHS 2003) Net sales for the First Nine Months 2004 were $39,236,393, compared to $31,531,366 for the same period in the previous year, a 24.4% increase. Excluding sales arising from the acquisition of Fleetwood's drapery operation, net sales of existing business increased 12.4%. Sales to the Company's recreational vehicle customers increased about 29.7% compared to the same period of the prior year, partially due to the additional Fleetwood business. Sales to the Company's manufactured housing customers increased by 31.6%, due to the additional Fleetwood business. Sales to the Company's hospitality customers increased about 4.6% for the nine months ended October 2, 2004 compared to the same period of the prior year. Cost of products sold increased to $31,034,588, or 79.1% in the First Nine Months 2004, compared to $24,658,537, or 78.2% in the First Nine Months 2003. Selling and administrative expenses were $5,885,577 in the First Nine Months 2004 versus $4,878,209 in the First Nine Months 2003. The increase is largely due to expenses associated with the Fleetwood acquisition, including amortization of the intangible asset of $519,000, and to increases in personnel costs. As a percentage of sales, selling and administrative expenses decreased from 15.5% to 15.0% due to increased sales volume. Excluding the amortization of the intangible asset, selling and administrative expenses would have decreased to 13.7% for the First Nine Months 2004. Interest expense increased to $83,825 in the First Nine Months 2004 from $39,890 in the First Nine Months 2003 because of interest on the inventory purchased from Fleetwood in January 2004, interest on the loan secured by the Company's Elkhart, Indiana facility which was not outstanding during the entire First Nine Months 2003, and periodic borrowings on the Company's line of credit. Net income increased to $1,391,027 in the First Nine Months 2004 compared to $1,224,950 in the First Nine Months 2003, an increase of 13.6%. This increase is largely the result of increased sales, partially offset by increased administrative expenses. 8 EBITDA EBITDA represents income before income taxes, interest expense, depreciation and amortization and 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 Principals ("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 Third Quarter 2004 and 2003, and the First Nine Months 2004 and 2003.
For the Thirteen Weeks Ended For the Thirty-Nine Weeks Ended ---------------------------- ------------------------------- October 2, 2004 September 27, 2003 October 2, 2004 September 27, 2003 --------------- ------------------ --------------- ------------------ Net Income $ 368,985 $ 419,147 $1,391,027 $1,224,950 Add: Income tax 250,000 275,000 915,000 807,000 Interest Expense 28,755 16,104 83,825 39,890 Depreciation and amortization 384,982 174,956 1,103,252 525,261 ---------- ---------- ---------- ---------- EBITDA $1,032,722 $ 885,207 $3,493,104 $2,597,101 ========== ========== ========== ==========
The Company's EBITDA increased 17% and 35% for the Third Quarter 2004 and First Nine Months 2004, respectively, compared to the same periods of the prior year. Item 4. Controls and Procedures. (a) The Company's Chief Executive Officer and Chief Financial Officer have reviewed the effectiveness of the Company's disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) 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. 9 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits filed herewith: 31.1 - Certification of President 31.2 - Certification of Treasurer 32 - 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 October 2, 2004. 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: November 16, 2004 By: /s/ William A.Bassett ---------------- ------------------------------------ William A. Bassett, President Date: November 16, 2004 By: /s/ Michael K. Solomon ----------------- ------------------------------------ Michael K. Solomon, Treasurer 11 EX-31.1 2 certification311.txt CERTIFICATION EXHIBIT 31.1 I, William A. Bassett, President, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Decorator Industries, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 16, 2004 By: /s/ William A. Bassett -------------------- ----------------------------------- William A. Bassett, President EX-31.2 3 certification312.txt CERTIFICATION EXHIBIT 31.2 I, Michael K. Solomon, Treasurer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Decorator Industries, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 16, 2004 By: /s/ Michael K. Solomon ----------------------------- -------------------------------- Michael K. Solomon, Treasurer EX-32 4 certification32.txt CERTIFICATION EXHIBIT 32 CERTIFICATION REQUIRED BY 18 U.S.C.SS.1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of Decorator Industries, Inc. ("the Company") on Form 10-Q for the quarterly period ended October 2, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, William A. Bassett, Chief Executive Officer of the Company, and Michael K. Solomon, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 16, 2004 By: /s/ William A. Bassett ----------------- ---------------------------------------- William A. Bassett, Chief Executive Officer Date: November 16, 2004 By: /s/ Michael K. Solomon ----------------- ------------------------------------- Michael K. Solomon, Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----