Attached files
file | filename |
---|---|
EX-32.1 - CERTIFICATION - DECORATOR INDUSTRIES INC | dii_ex32.htm |
EX-31.2 - CERTIFICATION - DECORATOR INDUSTRIES INC | dii_ex312.htm |
EX-31.1 - CERTIFICATION - DECORATOR INDUSTRIES INC | dii_ex311.htm |
EX-10.EE - LOAN AGREEMENT AND PROMISSORY NOTE - DECORATOR INDUSTRIES INC | dii_ex10ee.htm |
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
þ QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended April 3, 2010
OR
o 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
incorporation or
organization)
|
(I.R.S.
Employer
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 þ No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes þ No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | o | Smaller reporting company | þ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes o No þ
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 17, 2010 | |
Common Stock, Par Value $.20 Per Share | 3,120,263 shares |
PART
I – FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
DECORATOR
INDUSTRIES, INC
BALANCE
SHEETS
ASSETS
|
April
3, 2010
|
January
2, 2010
|
||||||
Current
Assets:
|
(UNAUDITED)
|
|||||||
Cash
and Cash Equivalents
|
$ | 311,667 | $ | 156,171 | ||||
Accounts
Receivable, less allowance for
|
||||||||
doubtful
accounts ($294,080 and $269,080)
|
1,541,535 | 1,164,669 | ||||||
Inventories
|
2,003,985 | 2,107,151 | ||||||
Income
Taxes Receivable
|
855,847 | 1,215,000 | ||||||
Other
Current Assets
|
389,380 | 366,047 | ||||||
Total
Current Assets
|
5,102,414 | 5,009,038 | ||||||
Property
and Equipment
|
||||||||
Land,
Buildings & Improvements
|
2,872,421 | 2,872,421 | ||||||
Machinery,
Equipment, Furniture & Fixtures and Software
|
7,094,046 | 7,270,508 | ||||||
Total
Property and Equipment
|
9,966,467 | 10,142,929 | ||||||
Less:
Accumulated Depreciation and Amortization
|
7,001,242 | 7,075,614 | ||||||
Active
Assets, Net
|
2,965,225 | 3,067,315 | ||||||
Property
Held for Sale, Net
|
3,357,565 | 3,357,565 | ||||||
Net
Property and Equipment
|
6,322,790 | 6,424,880 | ||||||
Goodwill,
less accumulated Amortization of $1,348,569
|
3,307,008 | 3,305,008 | ||||||
Deferred
Income taxes
|
1,261,000 | 1,053,000 | ||||||
Other
Assets
|
352,612 | 378,741 | ||||||
Total
Assets
|
$ | 16,345,824 | $ | 16,170,667 | ||||
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||||||
Cu
rren t Liabilities:
|
||||||||
Accounts
Payable
|
$ | 707,930 | $ | 553,086 | ||||
Current
Maturities of Long-term Debt
|
3,556,484 | 3,526,484 | ||||||
Checks
Issued But Not Yet Presented
|
222,200 | 135,518 | ||||||
Accrued
Expenses:
|
||||||||
Compensation
|
275,816 | 175,311 | ||||||
Other
|
955,291 | 811,234 | ||||||
Total
Current Liabilities
|
5,717,721 | 5,201,633 | ||||||
Long-Term
Debt
|
455,000 | 490,000 | ||||||
Total
Liabilities
|
6,172,721 | 5,691,633 | ||||||
Stockholders'
Equity
|
||||||||
Common
Stock $.20 par value: Authorized shares, 10,000,000;
|
||||||||
Issued
shares, 4,834,107 and 4,808,729
|
966,821 | 961,746 | ||||||
Paid-in
Capital
|
2,130,802 | 2,098,287 | ||||||
Retained
Earnings
|
15,388,403 | 15,731,924 | ||||||
18,486,026 | 18,791,957 | |||||||
Less:
Treasury stock, at cost: 1,713,844 shares
|
8,312,923 | 8,312,923 | ||||||
Total
Stockholders' Equity
|
10,173,103 | 10,479,034 | ||||||
Total
Liabilities and Stockholders' Equity
|
$ | 16,345,824 | $ | 16,170,667 |
The
accompanying notes are an integral part of the financial
statements.
1
DECORATOR
INDUSTRIES, INC
STATEMENTS
OF EARNINGS
(UNAUDITED)
For
the Thirteen Weeks Ended
|
||||||||||||||||
April
3, 2010
|
April
4, 2009
|
|||||||||||||||
Net
Sales
|
$ | 4,020,627 | 100.0 | % | $ | 5,105,638 | 100.0 | % | ||||||||
Cost
of Products Sold
|
3,248,495 | 80.8 | % | 4,386,843 | 85.9 | % | ||||||||||
Gross
Profit
|
772,132 | 19.2 | % | 718,795 | 14.1 | % | ||||||||||
Selling
and Administrative Expenses
|
1,279,169 | 31.8 | % | 2,488,990 | 48.8 | % | ||||||||||
Operating
Loss
|
(507,037 | ) | -12.6 | % | (1,770,195 | ) | -34.7 | % | ||||||||
Other
Income (Expense)
|
||||||||||||||||
Interest,
Investment, and Other
Income
|
9,248 | 0.2 | % | 3,631 | 0.1 | % | ||||||||||
Interest
Expense
|
(53,732 | ) | -1.3 | % | (36,365 | ) | -0.7 | % | ||||||||
Loss
Before Income Taxes
|
(551,521 | ) | -13.7 | % | (1,802,929 | ) | -35.3 | % | ||||||||
Provision
for Income Taxes
|
(208,000 | ) | -5.2 | % | (512,000 | ) | -10.0 | % | ||||||||
Net
Loss
|
$ | (343,521 | ) | -8.5 | % | $ | (1,290,929 | ) | -25.3 | % | ||||||
EARNINGS
PER SHARE
|
||||||||||||||||
Basic
|
$ | (0.11 | ) | $ | (0.44 | ) | ||||||||||
Diluted
|
$ | (0.11 | ) | $ | (0.44 | ) | ||||||||||
Weighted
Average Number of Shares Outstanding
|
||||||||||||||||
Basic
|
3,100,184 | 2,953,560 | ||||||||||||||
Diluted
|
3,100,184 | 2,953,560 |
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
|
||||||||
April
3, 2010
|
April
4, 2009
|
|||||||
Cash
Flows From Operating Activities:
|
||||||||
Net
Loss
|
$ | (343,521 | ) | $ | (1,290,929 | ) | ||
Adjustments
to Reconcile Net Loss to Net Cash
|
||||||||
Provided
by / (Used in) Operating Activities
|
||||||||
Depreciation
and Amortization
|
82,593 | 146,963 | ||||||
Provision
for Losses on Accounts Receivable
|
25,000 | 17,651 | ||||||
Deferred
Taxes
|
(208,000 | ) | (512,000 | ) | ||||
Stock-Based
Compensation
|
9,421 | 8,239 | ||||||
Loss
/ (Gain) on Disposal of Assets
|
14,816 | (7,017 | ) | |||||
Noncash
charges for asset impairment
|
- | 335,500 | ||||||
Increase/(Decrease)
from Changes in:
|
||||||||
Accounts
Receivable
|
(401,866 | ) | 58,502 | |||||
Inventories
|
103,166 | 872,672 | ||||||
Income
Taxes Receivable
|
359,153 | - | ||||||
Prepaid
Expenses
|
(23,333 | ) | (119,497 | ) | ||||
Other
Assets
|
26,129 | (42,286 | ) | |||||
Accounts
Payable
|
154,844 | 165,032 | ||||||
Accrued
Expenses
|
265,594 | (588,689 | ) | |||||
Net
Cash Provided by / (Used in) Operating Activities
|
63,996 | (955,859 | ) | |||||
Cash
Flows From Investing Activities:
|
||||||||
Capital
Expenditures
|
(2,969 | ) | (11,232 | ) | ||||
Net
Cash Paid for Acquisitions
|
(23,032 | ) | - | |||||
Proceeds
from Property Dispositions
|
7,650 | 10,350 | ||||||
Net
Cash Used in Investing Activities
|
(18,351 | ) | (882 | ) | ||||
Cash
Flows From Financing Activities:
|
||||||||
Long-term
Debt Payments
|
(30,000 | ) | (30,000 | ) | ||||
Change
in Checks Issued but Not Yet Presented
|
86,681 | 58,362 | ||||||
Net
Borrowings under Line-of-Credit Agreement
|
25,000 | 935,000 | ||||||
Issuance
of Stock for Directors' Trust
|
20,250 | 20,250 | ||||||
Proceeds
from Directors' Trust Stock Purchase
|
7,920 | - | ||||||
Net
Cash Provided by Financing Activities
|
109,851 | 983,612 | ||||||
Net
Increase in Cash and Cash Equivalents
|
155,496 | 26,871 | ||||||
Cash
and Cash Equivalents at Beginning of Year
|
156,171 | 16,499 | ||||||
Cash
and Cash Equivalents at End of Period
|
$ | 311,667 | $ | 43,370 | ||||
Supplemental
Disclosures of Cash Flow Information:
|
||||||||
Cash
Paid for:
|
||||||||
Interest
|
$ | 53,165 | $ | 33,582 | ||||
Income
Taxes
|
$ | - | $ | - | ||||
Increase
in Acquisition Cost/Goodwill
|
$ | 2,000 | $ | 3,000 | ||||
Working
Capital, other than Cash
|
21,032 | (3,000 | ) | |||||
Net
Cash Paid for Acquisition/Goodwill
|
$ | 23,032 | $ | - |
The
accompanying notes are an integral part of the financial statements.
3
DECORATOR
INDUSTRIES, INC.
NOTES
TO FINANCIAL STATEMENTS
THIRTEEN
WEEKS ENDED APRIL 3, 2010 AND APRIL 4, 2009
(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 April 3, 2010, the changes therein for the
thirteen week period then ended and the results of operations for the
thirteen week periods ended April 3, 2010 and April 4,
2009.
|
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 2, 2010. The results of operations for the thirteen week periods
ended April 3, 2010 and April 4, 2009 are not necessarily indicative of
operating results for the full
year.
|
NOTE
3.
|
INVENTORIES
|
|
Inventories
at April 3, 2010 and January 2, 2010 consisted of the
following:
|
April 3, 2010 | January 2, 2010 | |||||||
Raw Material and Supplies | $ | 1,371,914 | $ | 1,653,893 | ||||
In Process and Finished Goods | 632,071 | 453,258 | ||||||
Total Inventory | $ | 2,003,985 | $ | 2,107,151 |
NOTE
4.
|
EARNINGS PER
SHARE
|
|
Basic earnings per share is computed by dividing net income by the
weighted-average number of shares outstanding. Diluted earnings
per share includes the dilutive effect of stock options. No
dilution is shown for the thirteen week periods ended April 3, 2010 and
April 4, 2009, since the effect of the stock options on the net loss is
antidilutive. In accordance with ASC Topic 260 “Earnings per
Share” (formerly 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 | ||||||||
April 3, 2010 | April 4, 2009 | |||||||
Numerator: | ||||||||
Net loss | $ | (343,521 | ) | $ | (1,290,929 | ) | ||
Denominator: | ||||||||
Weighted-average number ofcommon shares outstanding | 3,100,184 | 2,953,560 | ||||||
Dilutive effect of | ||||||||
stock options on net income | 0 | 0 | ||||||
3,100,184 | 2,953,560 | |||||||
Diluted earnings per share: | $ | (0.11 | ) | $ | (0.44 | ) |
NOTE
5.
|
SUBSEQUENT
EVENT
|
|
On
April 20, 2010 the Company entered into a loan agreement with Crestmark
Bank (Crestmark). The agreement will provide up to $2,000,000 of borrowing
availability to be repaid on a demand basis and will be secured by the
Company’s accounts receivable and inventory and their products and
proceeds. Crestmark will advance up to 85% of the eligible accounts
receivable. The term of the agreement is two years. The
available funds will be used for working capital requirements of the
Company. The Company does not expect to immediately borrow against this
facility. The interest rate on borrowed funds will be prime
plus 3.50%, but will not be lower than 6.75%. Fees include a one percent
commitment fee, payable monthly, and a maintenance fee equal to the
greater of .4% of the average monthly loan balance or $2,500. The Company
will also be responsible for other fees associated with the
facility. The Company must maintain a tangible net worth of not
less than $5,000,000 and its working capital ratio, excluding its debt to
Wachovia Bank, must not be less than
1.20:1.
|
4
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
Cautionary
Statement: The Company's Reports on Form 10-K and Form 10-Q, its
Current Reports on Form 8-K, and any other written or oral statements made
by or on behalf of the Company contain or 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 will be affected by the level of demand for recreational
vehicles, manufactured housing and hotel/motel accommodations, the general
economic conditions, the Company’s ability to retain or replace its
line-of-credit, interest rate fluctuations, the availability of consumer
credit, availability of floor-plan credit for recreational vehicle and
manufactured housing retail dealers, availability of financing for
manufacturers, fuel prices, competitive products and pricing pressures
within the Company's markets, the Company's ability to contain its
manufacturing costs and expenses, and other factors. Any 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 as illustrated below.
April
3, 2010
|
January
2, 2010
|
|||||||
Current
Ratio
|
0.89:1
|
0.96:1
|
||||||
Quick
Ratio
|
0.54:1
|
0.56:1
|
||||||
Funded
Debt to Total Capital
|
28.3 | % | 27.7 | % | ||||
Working
Capital
|
$ | (615,307 | ) | $ | (192,595 | ) |
ITEM
2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(CONTINUED)
|
On April
20, 2010 the Company entered into a loan agreement with Crestmark Bank
(Crestmark). The agreement will provide up to $2,000,000 of borrowing
availability to be repaid on a demand basis and will be secured by the Company’s
accounts receivable and inventory and their products and proceeds. Crestmark
will advance up to 85% of the eligible accounts receivable. The term of the
agreement is two years. The available funds will be used for working
capital requirements of the Company. The Company does not expect to immediately
borrow against this facility. The interest rate on borrowed funds
will be prime plus 3.50%, but will not be lower than 6.75%. Fees include a one
percent commitment fee, payable monthly, and a maintenance fee equal to the
greater of .4% of the average monthly loan balance or $2,500. The Company will
also be responsible for other fees associated with the facility. The
Company must maintain a tangible net worth of not less than $5,000,000 and its
working capital ratio, excluding its debt to Wachovia Bank, must not be less
than 1.20:1.
The loan
balance with Wachovia was $3,426,483 at April 3, 2010. This balance was reduced
to $3,322,000 on April 16, 2010 per the terms of its loan modification
agreement. Wachovia will no longer provide working capital to the Company. This
loan is collateralized by six of the Company’s properties and matures on
December 31, 2010. Should any of this real estate be sold, the net proceeds will
pay down the balance of the loan. By December 31, 2010, the Company plans to
achieve one or more of the following:
1)
|
Sell
the real estate pledged to Wachovia and reduce or pay-off the
balance;
|
2)
|
Complete
additional Sale/Leaseback transactions on
real-estate;
|
3)
|
Find
an alternative lender(s) to replace Wachovia as its real-estate
lender;
|
4)
|
Negotiate
with Wachovia to extend the terms of the
loan.
|
The
Company has entered into a contract for the sale of its Douglas, GA
property. The contract is to close by May 24, 2010 and will provide
proceeds of approximately $210,000. The sale will result in a loss on sale of
approximately $15,000. The proceeds will be used to reduce the loan balance with
Wachovia.
The
Company received $359,153 of its Income Tax Receivable in the First Quarter. The
balance of this receivable has been collected in the Second Quarter. The cash
from the tax refund in addition to the available loan balance from Crestmark
will provide adequate working capital for operations for the balance of
2010.
The
Company has entered into a contract for the sale/leaseback of its Haleyville, AL
property. The contract is to close before the end of June 2010. The
proceeds of the transaction will be approximately $410,000 and will result in a
gain on sale of approximately $320,000. The proceeds will be used to reduce the
loan balance with Wachovia. The lease will have a ten year term. The first
year’s rent will be $55,900. The rent will increase by two percent per year and
the Company is responsible for all maintenance and the payment of property
taxes.
Capital
expenditures in the first quarter 2010 were $2,969. Capital expenditures over
the remainder of 2010 will be approximately $300,000, most of which will be for
the capitalization of a software modification project.
Days
Sales Outstanding (DSO) in accounts receivable were 34.1 days at April 3, 2010
compared to 30.6 days and 37.6 days at January 2, 2010 and April 4, 2009,
respectively. Net accounts receivable was $1,541,535 at April 3,
2010, compared to $1,164,669 and $2,138,103 at January 2, 2010 and April 4,
2009, respectively. The decrease in accounts receivable
compared to April 4, 2009 is due to the reduced sales volumes in the current
year. Inventories were $2,003,985 at April 3, 2010, as compared to
$2,107,151 and $2,910,909 at January 2, 2010 and April 4, 2009,
respectively. The inventory declines compared to April 4, 2009
are due to lower sales volume.
5
ITEM
2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(CONTINUED)
SALES BY
MARKET
|
The
following table represents net sales to each of the three different markets that
the Company serves for the thirteen week periods ended April 3, 2010 and April
4, 2009:
(dollars
in thousands)
For the Thirteen Weeks Ended | ||||||||||||||||
April 3, 2010 | April 4, 2009 | |||||||||||||||
Net
|
%
of
|
Net
|
%
of
|
|||||||||||||
Sales
|
total
|
Sales
|
total
|
|||||||||||||
Recreational
Vehicle
|
$ | 1,283 | 32 | % | $ | 853 | 17 | % | ||||||||
Manufactured
Housing
|
1,074 | 27 | % | 1,300 | 25 | % | ||||||||||
Hospitality
|
1,664 | 41 | % | 2,953 | 58 | % | ||||||||||
Total
Net Sales
|
4,021 | 100 | % | $ | 5,106 | 100 | % |
RESULTS OF
OPERATIONS
|
Thirteen Week Period
Ended April 3, 2010, (First Quarter 2010) compared
to
|
Thirteen Week Period
Ended April 4, 2009, (First Quarter
2009)
|
The
following table shows a comparison of the results of operations between First
Quarter 2010 and First Quarter 2009:
First
Quarter
|
%
|
First
Quarter
|
%
|
$
Increase
|
||||||||||||||||||||
2010
|
of
Sales
|
2009
|
of
Sales
|
(Decrease)
|
%
Change
|
|||||||||||||||||||
Net
Sales
|
$ | 4,020,627 | 100 | % | $ | 5,105,638 | 100 | % | $ | (1,085,011 | ) | -21.3 | % | |||||||||||
Cost
of Products Sold
|
3,248,495 | 80.8 | % | 4,386,843 | 85.9 | % | (1,138,348 | ) | -25.9 | % | ||||||||||||||
Gross
Profit
|
772,132 | 19.2 | % | 718,795 | 14.1 | % | 53,337 | 7.4 | % | |||||||||||||||
Selling
and Administrative Expenses
|
1,279,169 | 31.8 | % | 2,488,990 | 48.8 | % | (1,209,821 | ) | 48.6 | % | ||||||||||||||
Operating
Loss
|
(507,037 | ) | -12.6 | % | (1,770,195 | ) | -34.7 | % | 1,263,158 | -71.4 | % | |||||||||||||
Other
Income (Expense)
|
||||||||||||||||||||||||
Interest,
Investment and
|
||||||||||||||||||||||||
Other
Income
|
9,248 | 0.2 | % | 3,631 | 0.1 | % | 5,617 | 154.7 | % | |||||||||||||||
Interest
Expense
|
(53,732 | ) | -1.3 | % | (36,365 | ) | -0.7 | % | (17,367 | ) | 47.8 | % | ||||||||||||
Loss
Before Income Taxes
|
(551,521 | ) | -13.7 | % | (1,802,929 | ) | -35.3 | % | 1,251,408 | -69.4 | % | |||||||||||||
Provision
for Income Taxes
|
-- | (208,000) | -5.2 | % | (512,000 | ) | -10.0 | % | 304,000 | -59.4 | % | |||||||||||||
Net
Loss
|
(343,521 | ) | -8.5 | % | $ | (1,290,929 | ) | -25.3 | % | $ | 947,408 | -73.4 | % |
6
ITEM
2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(CONTINUED)
Net sales
for the First Quarter 2010 were $4,020,627 a decline of 21% from last year’s
First Quarter sales of $5,105,638. Sales to the Recreational Vehicle market
increased by 50% compared to last year. The recreational vehicle industry has
reported an increase in shipments for the first quarter of 96%. Sales to the
Manufactured Housing market decreased by 17% compared to last year. The
manufactured housing industry has reported decreased industry shipments of 2%
for the First Quarter 2010. Sales to the Hospitality market decreased by 44%
compared to last year, because of the reduction in new hotel construction and
refurbishments caused by the current slowdown in the hospitality
industry.
Cost of
products sold decreased from 85.9% in the First Quarter 2009 to 80.8% in the
First Quarter 2010. Last year’s costs included inventory obsolescence resulting
from bankruptcies filed by Fleetwood Enterprises and Monaco Coach Corp. The
First Quarter 2010 also benefitted from closing of underperforming facilities in
2009 and the Company’s decision to discontinue the production of sewn goods for
the RV industry.
Selling
and administrative expenses were reduced from $2,488,990 in the First Quarter
2009 to $1,279,169 in 2010. Last year’s First Quarter included a charge of
$750,000 for a facility closing. The remainder of the reduction resulted from
reduced headcount, elimination of benefits, and salary reductions.
Interest
expense increased to $53,732 in 2010 from $36,365 the year before. A higher
interest rate resulting from the loan modification and higher average loan
balances caused the increased expense.
The Net
Loss was reduced from $1,290,929 in the first quarter 2009 to $343,521 in 2010.
This improvement was achieved despite a reduction in sales volume by improving
the gross profit percentage and reducing selling and administrative
expenses.
7
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 U.S.
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 first quarters of fiscal 2010 and 2009:
For
the Thirteen Weeks Ended
|
||||||||
April
3, 2010
|
April
4, 2009
|
|||||||
Net
Loss
|
$ | (343,521 | ) | $ | (1,290,929 | ) | ||
Add:
|
||||||||
Interest
|
53,732 | 36,365 | ||||||
Taxes
|
(208,000 | ) | (512,000 | ) | ||||
Depreciation
& Amortization
|
82,593 | 146,963 | ||||||
Loss
/ (Gain) on Disposal
|
14,816 | (7,017 | ) | |||||
Noncash
charge for
|
||||||||
Asset
Impairment
|
- | 335,500 | ||||||
EBITDA
|
$ | (400,380 | ) | $ | (1,291,118 | ) |
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 April 3, 2010 and have
concluded that they were adequate and effective, based on the evaluation of such
disclosure controls and procedures required by paragraph (b) of Rules 13a-15 and
15d-15.
(b) During
the last fiscal quarter, there was no change 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 and 15d-15 that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
8
PART
II – OTHER INFORMATION
ITEM
6. EXHIBITS
Filed
herewith:
10EE | - | Loan agreement and Promissory Note with Crestmark Bank |
31.1 | - |
Certification
of Principal Executive Officer
|
31.2 | - |
Certification
of Principal Financial Officer
|
32 | - |
Certificate
required by 18 U.S.C. §1350.
|
9
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 17,
2010
|
By:
|
/s/ William A. Johnson | |
William A. Johnson, Chief Executive Officer and President | |||
Date: May 17, 2010 | By: | /s/ Michael K. Solomon | |
Michael K. Solomon, Chief Financial Officer |
10