-----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, OFH2rDH4CspNhgvQ4Fd/r/txCNzvJdkPYLjGOaMTBNoJjEYO/nryiP5tnBmyYWSA OwvvP/0x+mGUgm3f1JR6+Q== 0000912057-97-011585.txt : 19970402 0000912057-97-011585.hdr.sgml : 19970402 ACCESSION NUMBER: 0000912057-97-011585 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961228 FILED AS OF DATE: 19970401 SROS: AMEX 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: 1228 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-07753 FILM NUMBER: 97572799 BUSINESS ADDRESS: STREET 1: 10011 PINES BLVD SUITE 201 CITY: PEMBROKE PINES STATE: FL ZIP: 33024 BUSINESS PHONE: 3054368909 10-K405/A 1 10-K405/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 28, 1996 [ ] TRANSITION REPORT UNDER 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., Pembroke Pines, Florida 33024 ------------------------------------------- ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (954)436-8909 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, Par Value $.20 Per Share American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[X] Aggregate market value at March 14, 1997 of outstanding shares of Common Stock other than shares held by officers, directors and their respective associates: $25,858,918* Number of shares outstanding at March 14, 1997: 2,375,513* DOCUMENTS INCORPORATED BY REFERENCE None * Includes 29,832 shares issuable upon surrender of the outstanding $.10 par Common Stock. NOTE:In this report, unless the context otherwise requires, Registrant or Company means Decorator Industries, Inc. and its subsidiaries, herein sometimes also called "Decorator Industries". References to a particular year or the captions "For the Year" and "At Year End" refer to the fiscal periods as follows: 1996 - 52 weeks ended December 28, 1996 1995 - 52 weeks ended December 30, 1995 1994 - 52 weeks ended December 31, 1994 1993 - 52 weeks ended January 1, 1994 1992 - 53 weeks ended January 2, 1993 PART I ITEM 1. BUSINESS. The Company is engaged in the production and sale of window coverings, bedspreads, furniture and complementary products. The Haleyville Division manufactures window coverings, bedspreads, furniture and complementary products for sale to original equipment manufactured home builders and recreational vehicle manufacturers. The Liberia Division manufactures draperies and bedspreads for sale to hotels, motels and other installations nationwide as well as original equipment manufactured home builders. The Company has one industry segment and one class of products. The business in which the Company is engaged is a competitive environment, and it competes with manufacturers located throughout the country. However, no reliable information is available to enable the Company to determine its relative position among its competitors. The principal methods of competition are price, design and service. During 1996 one customer, Fleetwood Enterprises, accounted for approximately 22% of the Company's total sales. In the event of the loss of that customer, there would be a material adverse effect on the Company. That customer operates in two industries, the manufactured housing industry and the recreational vehicle industry. Further, purchasing decisions are made at each individual plant of that customer. The Company services many of these plants and considers each of these plants to be an independent customer. The Company's backlog of orders at any given time is not material in amount and is not significant in the business. No material portion of the Company's sales or income is derived from customers in foreign countries. The chief raw materials used by the Company are fabrics made from both natural and man-made fibers. The raw materials are obtained primarily from converters and mills. The Company is not dependent upon one or a very few suppliers. Most of its suppliers are large firms with whom, in the opinion of management, the Company enjoys good relationships. The Company has never experienced any significant shortage in its supply of raw materials. The Company has no significant patents, licenses, franchises or concessions. It owns certain trademarks and copyrights. Although the Company believes the trademarks aid in identifying its products, it is unable to evaluate the importance of the trademarks to its business. Expenditures for research and development during 1996 and 1995 were not significant. Compliance with federal, state and local environmental protection provisions will have no material effect upon the capital expenditures, earnings or competitive position of the Company. The Company employs approximately 630 sales, production, warehouse and administrative employees and also uses the services of independent sales representatives. RECENT DEVELOPMENTS The Company has entered into an agreement under which it acquired the business and certain assets of Specialty Window Coverings Corp., an Elkhart, Indiana based manufacturer of pleated shades for the recreational vehicle market. The acquisition was effective March 15, 1997. The agreement provides for a cash payment of approximately $2.3 million at closing plus conditional payments, based on earnings, of up to $2 million over the succeeding two years. Specialty will continue to operate from its existing facilities, which are being expanded from 20,000 to 35,000 square feet and which will be leased by the Company from the former owners of Specialty. Specialty had net sales of approximately $5 million in 1996. The Company will recognize goodwill of approximately $1.3 million in connection with the acquisition. On March 4, 1997, the Company further expanded its product line to include furniture and cushions for the recreational vehicle market by having purchased the assets of Action Design Interiors, also based in Elkhart, Indiana. ITEM 2. PROPERTIES. The Haleyville Division produces window coverings, bedspreads and furniture from plants located in Haleyville, Alabama; Salisbury, North Carolina; Lakeland, Florida; Bloomsburg, Pennsylvania; and Goshen and Elkhart, Indiana. The Haleyville plant is a one story building owned by the Company, which contains approximately 54,000 square feet of manufacturing, warehouse and office space. The Salisbury plant is a one story building of approximately 22,500 square feet of manufacturing, warehouse and office space which is leased by the Company under a lease including renewal options through the year 2000. The Lakeland plant, a one story building of approximately 7,500 square feet, is leased by the Company for a term ending in December 1998. The Bloomsburg plant is a one story building of approximately 42,000 square feet which is owned by the Company. The Goshen plant is a two-story building containing approximately 35,000 square feet of manufacturing, warehouse and office space. The building is leased for a term ending August 31, 1998. The Elkhart building contains approximately 8,000 square feet of manufacturing, warehouse and office space and is leased for a term ending February 28, 1999. The Liberia Division manufactures draperies and bedspreads in facilities located in Bossier City, Louisiana and Abbotsford, Wisconsin. The Bossier City plant, which contains approximately 20,000 square feet of manufacturing, warehouse and office space, is owned by the Company. The Abbotsford plant, which contains approximately 21,600 square feet of manufacturing, warehouse and office space, is leased for a term expiring November 30, 2006. 2 The Company considers that its offices, plants, machinery and equipment are well maintained, adequately insured and suitable for their purposes and that its plants are adequate for the presently anticipated needs of the business. The Company owns a one story building of approximately 12,800 square feet in Thomasville, Georgia. This building was formerly used as a production facility by the Haleyville Division and is currently vacant and available for sale. ITEM 3. LEGAL PROCEEDINGS. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock is listed and traded on the American Stock Exchange, AMEX symbol DII. Common Stock price information is set forth in the table below. Sales prices prior to the third quarter of 1996 have been adjusted for the four-for- three stock split in June 1996. 1996 Sales Prices 1995 Sales Prices ----------------- ----------------- High Low High Low ---- --- ---- --- First Quarter 7 5-29/32 7-1/8 5-11/32 Second Quarter 8-5/8 6-27/32 7-19/32 6-9/32 Third Quarter 11-7/8 8-1/8 7-13/32 6-21/32 Fourth Quarter 13-5/8 10-1/8 6-3/4 6 As of March 14, 1997, the Company had 598 shareholders of record of its Common Stock. Of this total, 433 were holders of the $.20 par value stock and 165 were holders of the old $.10 par value stock who had not yet exchanged their stock for the $.20 par value stock in connection with the one-for-two reverse stock split in July 1982. The $.20 par value stock to which the holders of the old $.10 par value stock are entitled, together with the accrued cash dividends thereon, are in the process of being escheated to the proper states as unclaimed property. Total cash dividend payments were $.28 per share in 1996 and $.27 per share in 1995. 3 DECORATOR INDUSTRIES, INC. ITEM 6. SELECTED FINANCIAL DATA
1996 1995 1994 1993 1992 ------------- ------------- ------------- ------------- -------------- OPERATIONS - ---------- Net Sales $38,649,687 $34,207,259 $33,246,590 $28,964,223 $23,605,290 Net Income 3,065,220 2,414,678 2,823,770 2,370,232 1,528,787 -------------------------------------------------------------------------------------- AT YEAR-END - ----------- Total Assets 18,394,357 16,415,659 16,406,670 13,188,452 11,236,785 Long-term Obligations 549,433 587,084 629,450 431,260 68,475 Long-term Debt Ratio 4.03% 5.14% 5.30% 4.70% 1.10% Working Capital 9,003,836 6,925,352 7,479,176 5,322,279 3,214,756 Working Capital Ratio 2.94 2.54 2.75 2.39 1.68 Stockholders' Equity 13,010,946 11,147,754 11,322,046 8,741,511 6,417,134 -------------------------------------------------------------------------------------- PER SHARE - --------- Net Income Primary 1.31 0.93 1.07 0.94 0.63 Fully Diluted 1.22 0.87 0.98 0.82 0.56 Book Value $5.50 $4.67 $4.24 $3.44 $2.59 Cash Dividends Paid $0.28 (a) $0.27 $0.23 $0.15 --
Note: Per share amounts, except for cash dividends, have been adjusted for a four-for-three stock split effective June 17, 1996 and a two- for-one stock split in April 1993. (a) The quarterly dividend rate remained at $0.07 per share after the four-for-three split in June 1996, effectively increasing the dividend rate by 33%. 4 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. LIQUIDITY AND FINANCIAL RESOURCES: The Company's financial condition continues to be strong, as evidenced by the following statistical measures: 1) Working capital at December 28, 1996 was $9,003,836 compared to $6,925,352 at December 30, 1995. 2) The current ratio was 2.94:1 at year-end 1996 compared to 2.54:1 at year-end 1995. 3) The liquid ratio changed from 1.9:1 at year-end 1995 to 2.3:1 at year- end 1996. 4) The long-term debt ratio continued to be minimal, at 4.0% as of December 28, 1996 compared to 5.1% a year earlier. Accounts receivable and inventories increased by 5% compared to a 13% increase in net sales. These assets continue to be well managed. Capital expenditures for 1996 were $418,557. Management projects that capital expenditures in 1997 will exceed somewhat the amount spent in 1996. The acquisition of the business and assets of Specialty Window Coverings Corp., referred to in "Recent Developments" in Item 1 of this report, will be funded with the proceeds of the sale of short term investments. Management does not foresee any events which will adversely affect its liquidity during 1997 and, further, the Company's financial condition is more than adequate to finance internal growth and additional acquisitions of profitable, growing businesses. RESULTS OF OPERATIONS: The following table shows the percentage relationship to net sales of certain items in the Company's Statement of Income: 1996 1995 1994 ---- ---- ---- Net sales . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% Cost of products sold. . . . . . . . . . 74.1 75.3 71.8 Selling and administrative expenses. . . 14.5 14.5 15.2 Interest and investment income . . . . . (.8) (1.2) (.4) Interest expense . . . . . . . . . . . . .1 .1 .2 Net income . . . . . . . . . . . . . . 7.9 7.1 8.5 1996 VS 1995 Fiscal 1996's net sales increased to $38,649,687, an increase of 13% over fiscal 1995's net sales of $34,207,259. Sales to the manufactured housing market increased 8% to $21,533,000; sales to the recreational market increased by 32% to $8,696,000; and hospitality sales increased by 10% to $8,421,000. The increase in sales to the recreational market is largely attributable to the acquisition made in August 1995 of a supplier to the recreational vehicle industry. Without this acquisition, sales to the recreational vehicle industry would have shown a 7% increase. Cost of products sold as a percentage of sales decreased in 1996 to 74.1% from 75.3% in 1995. This improvement was accomplished by increasing efficiencies in labor and materials. 5 Selling and administrative expenses remained constant at 14.5% of sales in both 1996 and 1995. The increase in net income to $3,065,220, 7.9% of net sales in 1996, from $2,414,678, 7.1% of net sales in 1995, is the result of the increased sales volumes and the improved efficiencies in labor and materials. Primary earnings per share were $1.31 in 1996 compared to $.93 in 1995, a 41% increase. This percentage was the result of the higher net income and fewer average shares outstanding. The Company repurchased 346,863 shares of its outstanding Common Stock during 1995 and 1996. 1995 VS 1994 Net sales in 1995 increased to $34,207,259 from $33,246,590, an increase of 3%. The Company's growth rate was negatively affected by a decline in the recreational vehicle market and a slowing in the growth rate in the manufactured housing market. Cost of goods sold as a percentage of sales increased to 75.3% in 1995 from 71.8% in 1994. This increase was attributable to the tightening of margins in certain markets caused by competitive pricing pressures. Selling and administrative expenses decreased by $88,343 due to lower accruals for performance and incentive bonuses. The decrease in net income to $2,414,678 in 1995 from $2,823,770 in 1994 was attributable almost entirely to the increase in cost of goods sold. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements and reports of independent certified public accountants listed in Item 14(a) of this report are filed under this Item 8. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information concerning the directors and executive officers of the Company is set forth below. William A. Bassett, age 60, has been President and a director of the Company since 1980, Chief Executive Officer since February 1993 and Chairman of the Board since January 1994. Michael K. Solomon, age 47, has been Vice President of the Company since November 1994, Treasurer and Chief Financial Officer of the Company since 1985 and a director of the Company since 1987. Jerome B. Lieber, age 76, has been Secretary and a director of the Company since 1961. He is Senior Counsel to the law firm of Klett Lieber Rooney & Schorling, a Professional Corporation, Pittsburgh, Pennsylvania, which serves as general counsel to the Company. Mr. Lieber previously had been a senior partner in that firm. 6 Herbert Walker, age 83, has been a director of the Company since 1980. He has been a management consultant since 1980 and served as a registered representative of Harvest Financial Corp., a broker-dealer, since 1982. Joseph N. Ellis, age 68, has been a director of the Company since 1993. He founded LaSalle-Deitch Co., Inc., a distributor of products for the manufactured housing and recreational vehicle industries, in 1963 and served as its President, Chief Executive Officer and Chairman from 1971 until his retirement in 1992. Mr. Ellis is currently a management consultant. William H. Allen, Jr., age 61, was appointed to the Board of Directors on February 28, 1995. He has been Vice Chairman of the Board of NationsBank N.A. (South) since December 1995 and previously served as Chairman of the Board and Chief Executive Officer of Intercontinental Bank. Mr. Allen is also a director of American Bankers Life Insurance Company and Winsloew Furniture, Inc. The Board of Directors is divided into three classes of directors with staggered terms. One class is elected at each annual meeting of shareholders for a three-year term. Subject to the provisions of any employment agreements with the Company, the term of office of all executive officers is at the discretion of the Board of Directors. ITEM 11. EXECUTIVE COMPENSATION. The following table shows the compensation of the named executive officers of the Company for each of the last three fiscal years. SUMMARY COMPENSATION TABLE
Long-Term Compensation ------------ Annual Compensation Awards ------------------- ------ Name and Fiscal Optioned All Other Com- Principal Position Year Salary($) Bonus($) Other($)(1) Shares (#) pensation($)(2) - ------------------ ---- --------- -------- ----------- ---------- --------------- William A. Bassett(3) 1996 236,156 156,000 * 33,333 34,745 Chairman of the Board, 1995 224,910 58,234 * --- 34,745 President and Chief 1994 209,100 78,689 49,637 13,333 21,577 Executive Officer Michael K. Solomon 1996 107,000 28,940 27,106 13,333 ---- Vice President, Treasurer 1995 104,500 14,558 * --- ---- and Chief Financial Officer 1994 99,500 19,672 14,483 5,999 ----
- -------------------- (1) Medical/dental reimbursement plan payments, country club memberships, personal use of Company vehicles, and payments made in accordance with Company policy for disqualifying sales of Common Stock acquired upon the exercise of a qualified stock option. For 1996, payment to Mr. Solomon for such sales was $18,059 and provided a net benefit to the Company of $11,919. For 1994, payments to Messrs. Bassett and Solomon for such sales were $47,884 and $8,833, respectively. All such sales during 1994 provided a net benefit to the Company of $94,970. An asterisk indicates that the total of other annual compensation for that year was less than 10% of salary and bonus for that year. (2) Premiums paid by the Company on life and long-term disability insurance policies. (3) The Company has an employment agreement with Mr. Bassett which provides for an annual salary of not less than $214,200. The agreement expires July 1, 2004. 7 The following table provides information on options granted to the named executive officers in fiscal 1996 under the Company's 1995 Incentive Stock Option Plan:
OPTION GRANTS IN LAST FISCAL YEAR Individual Grants ------------------------------------------------- Potential Realizable Value of Percent of Assumed Annual Rates of Total Options Stock Price Appreciation for Options Granted to Exercise Option Term (2) Granted Employees Price Expiration ---------------------- Name (Shs)(1) in 1996 Per Share(1) Date 5% 10% ---- -------- ------------ ------------ ---------- ------- ------- William A. 33,333 20.0% $7.50 5/3/06 $157,277 $398,432 Bassett Michael K. 13,333 8.0 7.50 5/3/06 62,888 159,370 Solomon
- -------------------- (1) As adjusted for the four-for-three stock split in June 1996. Options heretofore granted under the 1995 Incentive Stock Option Plan have a ten year term and vest 20% on the date of grant and 20% annually thereafter through the fourth anniversary of the grant. (2) Potential realizable value is based on the assumption that the market price of the Common Stock appreciates at the annual rates shown (compounded annually) from the date of grant until the end of the ten year option term. Potential realizable value is shown net of exercise price. These numbers are calculated based on the regulations promulgated by the Securities and Exchange Commission and do not reflect the company's estimate of future stock price growth. The following table sets forth information concerning the exercise of stock options during 1996 by the named executive officers and the value of their unexercised, in-the-money stock options at the end of that fiscal year (December 28, 1996). All options outstanding at December 28, 1996, except for those granted after 1995, were exercisable at any time prior to their respective expiration dates. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Value of Shares Acquired Value Optioned Shares Options at Name on Exercise Realized($) at 12/28/96(#) 12/28/96($)(1) - ---- --------------- ----------- --------------- -------------- William A. Bassett 26,666(2) 146,378 133,331 1,083,294 Michael K. Solomon 13,332(2) 83,388 45,998 357,978
- ----------------- (1) Assumes a market value of $11.50 per share, which was the last reported sale price on the American Stock Exchange on December 27, 1996. (2) As adjusted for the four-for-three stock split in June 1996. 8 Directors who are not employees of the Company are paid a fee of $10,000 per year for their services as directors. The Company's medical and dental reimbursement plan provides reimbursement to the corporate and certain divisional officers of the Company and their dependents (as defined in Section 152 of the Internal Revenue Code) for their medical and dental expenses. Benefits under the plan are limited to 10% of the participant's compensation during the plan year. The plan also prohibits any participant from receiving "double reimbursement", i.e. if a participant receives reimbursement from another source, he or she must remit to the Company benefits received under the plan. The Company's 1984 Incentive Stock Option Plan, which expired February 22, 1994, authorized the granting to key employees of options to purchase up to 604,666 shares of the Company's Common Stock. The purchase price of optioned shares is the fair market value of the Common Stock on the date of grant, and the maximum term of the options is ten years; in the case of options granted to employees who owned more than 10% of the outstanding Common Stock, however, the purchase price was 110% of the fair market value of the Common Stock on the date of grant and the term of the option was five years. The number of optioned shares and the purchase price per share are subject to adjustment for stock splits, stock dividends, reclassifications and the like. On April 3, 1995 the Board of Directors adopted, and on June 5, 1995 the stockholders approved, the Company's 1995 Incentive Stock Option Plan (the "1995 Plan") which has a term of ten years. The 1995 Plan authorizes the issuance of up to 333,332 shares of Common Stock pursuant to stock options granted to key employees of the Company. The purchase price of optioned shares must be the fair market value of the Common Stock on the date of grant, and the maximum term of the options is ten years; in the case of options granted to employees who own more than 10% of the outstanding Common Stock, however, the purchase price must be 110% of the fair market value of the Common Stock on the date of grant and the term of the option cannot exceed five years. The number of shares that may be issued under the 1995 Plan, the number of optioned shares and the purchase price per share are subject to adjustment for stock splits, stock dividends, reclassifications and the like. 9 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information concerning the common stockholding at March 14, 1997 of the directors and named executive officers of the Company, and of the directors and executive officers as a group, is set forth in the following table. Unless otherwise indicated, each stockholder has sole voting and investment power with respect to the shares listed. Shares Name or Group Beneficially owned Percent of Class (1) - ------------- ------------------ -------------------- William A. Bassett 241,547 (2) 9.71% Michael K. Solomon 62,663 (3) 2.60 Jerome B. Lieber 8,772 (4) --- Herbert Walker 3,000 --- Joseph N. Ellis 1,600 --- William H. Allen, Jr. 2,500 --- All directors and executive officers as a group 320,082(5) 12.70 - ---------------------------- (1) Shares which the named stockholder has the right to acquire within 60 days are deemed outstanding for the purpose of computing that stockholder's percentage. (2) Includes 113,331 optioned shares which may be acquired within 60 days. (3) Includes 31,997 optioned shares which may be acquired within 60 days. (4) Includes 3,226 shares held in a charitable trust as to which Mr. Lieber disclaims beneficial ownership. (5) Includes 145,328 optioned shares which may be acquired within 60 days. Coury Investments, Ltd., a real estate and securities investment limited partnership organized in Florida, informed the Company in mid-1993 that it then beneficially owned 180,000 shares of the Company's Common Stock. The Company has no further information regarding Coury's ownership of Common Stock. FMR Corp. of Boston, Massachusetts, has furnished the Company a copy of its Schedule 13G in which it reported that as of December 31, 1996 Fidelity Management & Research Company, a wholly-owned subsidiary of FMR Corp. and a registered investment adviser, had sole investment power with respect to 241,866 shares (10.18%) of the Company's Common Stock. ZPR Investment Management Inc. of Orange City, Florida, a registered investment adviser, has furnished the Company a copy of its Schedule 13G dated January 10, 1997 in which it reported that it had sole voting power with respect to 172,697 shares (7.27%) of the Company's Common Stock. 10 Laifer Capital Management, Inc. of New York, New York has furnished the Company a copy of its Schedule 13G dated February 7, 1996 in which it reported beneficial ownership of a total of 98,400 shares of the Company's Common Stock, including sole power to vote 72,400 shares, sole power to dispose of 65,000 shares and shared power to dispose of 33,400 shares. No further information has been received from that company. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT: FINANCIAL STATEMENTS AND SCHEDULES (1) Report of Independent Certified Public Accountants (2) Consolidated Balance Sheet - December 28, 1996 and December 30, 1995 (3) Consolidated Statement of Income for the three fiscal years ended December 28, 1996 (4) Consolidated Statement of Stockholders' Equity for the three fiscal years ended December 28, 1996 (5) Consolidated Statement of Cash Flows for the three fiscal years ended December 28, 1996 (6) Notes to Consolidated Financial Statements (7) Report of Independent Certified Public Accountants on Financial Statement Schedule Schedule VIII - Valuation and Qualifying Accounts All other schedules are omitted because they are not required or are inapplicable or the information is included in the financial statements or notes thereto. EXHIBITS 3A Articles of Incorporation as amended to date, filed as Exhibit 3A to Form 10-K for the fiscal year ended December 28, 1985 and incorporated herein by reference. 3B.1 By-laws as amended to date, filed as Exhibit 3B.1 to Form 10-Q for the quarter ended July 2, 1988 and incorporated herein by reference. 11 10E Lease dated February 9, 1984 between the registrant, as lessee, and Leon and Eleanor Bradshaw covering property at 500 North Long Street, Salisbury, North Carolina, filed as Exhibit 10(b)(4)(iv) to Registration Statement No. 2-92853 and incorporated herein by reference. 10H Lease Agreement dated December 13, 1983 covering property at 101 West Linden Street, Abbotsford, Wisconsin, and assignment thereof to the registrant, as lessee, dated October 2, 1985, filed as Exhibit 10H to Form 10-K for the fiscal year ended December 28, 1985 and incorporated herein by reference. 10H.1 Lease Modification Agreement dated May 20, 1988 regarding Exhibit 10H, filed as Exhibit 10H.1 to Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by reference. 10H.2 Lease Modification Agreement dated September 30, 1996 regarding Exhibit 10H, filed herewith. 10K.1 1984 Incentive Stock Option Plan, as amended to date, filed as Exhibit 10K.1 to Form 10-Q for the quarter ended October 3, 1987 and incorporated herein by reference.* 10M.1 Medical and Dental Reimbursement Plan, as amended to date, filed as Exhibit 10M.1 to Form 10-K for the fiscal year ended January 3, 1987 and incorporated herein by reference.* 10T Employment Agreement dated August 2, 1994 between the registrant and William Bassett, filed as Exhibit 10T to Form 10-Q for the quarter ended July 2, 1994 and incorporated herein by reference.* 10U 1995 Incentive Stock Option Plan, filed as Exhibit 10U to Form 10-K for the fiscal year ended December 30, 1995 and incorporated herein by reference.* 10V Purchase and Sale Agreement dated March 14, 1997 between the registrant and Specialty Window Coverings Corp., filed herewith. 11L Statement re computation of fully diluted income per share, filed herewith. 24D Consent of Accountants, filed herewith. 27 Financial Data Schedule, filed herewith. - ------------ *Management contract or compensatory plan. (b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the last quarter of 1996. 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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) By: /s/ Michael K. Solomon ----------------------------------- Michael K. Solomon Vice President Dated: March 21, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Name Title Signature Date - ---- ----- --------- ---- William A. Bassett Chairman, President, /s/ William A. Bassett March 21, 1997 Chief Executive ------------------------ Officer and Director Michael K. Solomon Vice President, Treasurer, /s/ Michael K. Solomon March 21, 1997 Principal Financial ------------------------ and Accounting Officer, and Director Jerome B. Lieber Director /s/ Jerome B. Lieber March 21, 1997 ------------------------ Herbert Walker Director /s/ Herbert Walker March 21, 1997 ------------------------ Joseph N. Ellis Director /s/ Joseph N. Ellis March 21, 1997 ------------------------ William H. Allen, Jr. Director /s/ William H. Allen, Jr. March 21, 1997 ------------------------
13 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders Decorator Industries, Inc. We have audited the accompanying consolidated balance sheets of Decorator Industries, Inc. and subsidiaries as of December 28, 1996 and December 30, 1995 and the related consolidated statements of income and stockholders' equity and cash flows for each of the three fiscal years in the period ended December 28, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Decorator Industries, Inc. as of December 28, 1996 and December 30, 1995, and the results of their operations and their cash flows for each of the three fiscal years in the period ended December 28, 1996 in conformity with generally accepted accounting principles. /s/ Louis Plung & Company LOUIS PLUNG & COMPANY Certified Public Accountants Pittsburgh, Pennsylvania February 8, 1997 F-1 DECORATOR INDUSTRIES, INC BALANCE SHEET Fiscal Year End 1996 1995 ---- ---- ASSETS CURRENT ASSETS: Cash and Cash Equivalents $4,714,356 $5,269,772 Short-term Investments 2,539,613 14,607 Accounts Receivable, less allowance for doubtful accounts ($232,302 and $229,722 ) 2,972,572 2,776,039 Note Receivable 80,000 80,000 Inventories 3,083,004 3,005,383 Prepaid Expenses 117,269 126,373 Prepaid and Deferred Income Taxes 136,000 159,000 ---------- ---------- Total Current Assets 13,642,814 11,431,174 ---------- ---------- PROPERTY & EQUIPMENT: Land 130,408 130,408 Buildings & Improvements 2,224,605 2,205,800 Equipment 3,042,968 2,740,656 ---------- ---------- Total Property & Equipment 5,397,981 5,076,864 Less: Accumulated Depreciation and Amortization 2,249,848 1,988,557 ---------- ---------- Net Property & Equipment 3,148,133 3,088,307 ---------- ---------- EXCESS OF COST OVER NET ASSETS ACQUIRED less accumulated amortization of $874,225 and $815,438 1,402,818 1,461,605 NOTE RECEIVABLE 60,000 140,000 OTHER ASSETS 140,592 294,573 ---------- ---------- TOTAL ASSETS $18,394,357 $16,415,659 ---------- ---------- ---------- ---------- LIABILITIES & STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable $2,624,552 $2,751,329 Current Maturities of long-term debt 41,685 41,032 Accrued Expenses: Income taxes 63,397 60,873 Compensation 1,443,921 1,072,321 Other 465,423 580,267 ---------- ---------- Total Current Liabilities 4,638,978 4,505,822 ---------- ---------- LONG-TERM DEBT 549,433 587,083 DEFERRED INCOME TAXES 195,000 175,000 ---------- ---------- Total Liabilities 5,383,411 5,267,905 ---------- ---------- STOCKHOLDERS' EQUITY: Common stock $.20 par value: Authorized shares, 5,000,000 ; Issued shares, 2,725,462 and 2,644,855 545,094 528,973 Paid-in capital 1,546,152 1,692,185 Retained Earnings 12,478,625 12,228,865 ---------- ---------- 14,569,871 14,450,023 Less: Treasury Stock, at cost: 369,087 and 853,143 shares 1,558,925 3,302,269 ---------- ---------- Total Stockholders' Equity 13,010,946 11,147,754 ---------- ---------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $18,394,357 $16,415,659 ---------- ---------- ---------- ---------- The accompanying notes are an integral part of the financial statements. F-2 DECORATOR INDUSTRIES, INC. STATEMENT OF INCOME For the Year ------------ 1996 1995 1994 ---- ---- ---- INCOME: Net Sales $38,649,687 $34,207,259 $33,246,590 ----------- ----------- ----------- ----------- ----------- ----------- COST AND EXPENSES: Cost of products sold 28,626,094 25,760,666 23,881,370 Selling and administrative 5,611,222 4,961,007 5,049,350 Interest and dividend income (305,370) (420,329) (129,668) Interest expense 38,521 47,237 61,768 ---------- ---------- ---------- Total costs and expenses 33,970,467 30,348,581 28,862,820 ---------- ---------- ---------- Income before income taxes 4,679,220 3,858,678 4,383,770 Income taxes 1,614,000 1,444,000 1,560,000 --------- --------- --------- NET INCOME $3,065,220 $2,414,678 $2,823,770 ----------- ----------- ----------- ----------- ----------- ----------- TOTAL PRIMARY EARNINGS PER SHARE $1.31 $ .93 $1.07 ----- ----- ----- ----- ----- ----- FULLY DILUTED EARNINGS PER SHARE $1.22 $ .87 $ .98 ----- ----- ----- ----- ----- ----- Average Number of shares Outstanding: Primary 2,333,972 2,585,568 2,629,295 Fully diluted 2,511,610 2,790,177 2,894,269 The accompanying notes are an integral part of the financial statements. F-3 DECORATOR INDUSTRIES, INC. STATEMENT OF STOCKHOLDERS' EQUITY
COMMON PAID-IN RETAINED TREASURY STOCK CAPITAL EARNINGS STOCK TOTAL ----- ------- -------- ----- ----- Balance at January 1, 1994 $ 512,917 $ 1,354,844 $ 7,965,077 $(1,091,327) $ 8,741,511 Transactions for 1994 Net Profit 2,823,770 2,823,770 Issuance of stock for Exercise of options 9,800 115,509 (61,782) 63,527 Stock option tax benefit 149,475 149,475 Dividends Paid (456,237) (456,237) --------- ---------- ---------- ---------- ---------- Balance at December 31, 1994 522,717 1,619,828 10,332,610 (1,153,109) 11,322,046 Transactions for 1995 Net Profit 2,414,678 2,414,678 Issuance of stock for exercise of options 6,256 60,903 (11,019) 56,140 Stock option tax benefit 11,454 11,454 Purchase of common stock for treasury (2,138,141) (2,138,141) Dividends Paid (518,423) (518,423) --------- ---------- ---------- ---------- ---------- Balance at December 30, 1995 528,973 1,692,185 12,228,865 (3,302,269) 11,147,754 Transactions for 1996 Net Profit 3,065,220 3,065,220 Issuance of stock for exercise of options 16,122 148,839 165,012 Stock option tax benefit 18,000 18,000 Purchase of common stock for treasury (769,829) (769,829) Dividends Paid (613,922) (613,922) Record stock split (312,872) (2,201,539) 2,513,172 (1,290) --------- ---------- ---------- ---------- ---------- Balance at December 28, 1996 $ 545,095 $ 1,546,152 $12,478,624 $(1,558,926) $13,010,945 --------- ---------- ---------- ---------- ---------- --------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements. F-4 DECORATOR INDUSTRIES, INC. STATEMENT OF CASH FLOWS
For The Year 1996 1995 1994 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $3,065,220 $2,414,678 $2,823,770 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 412,172 380,100 347,100 Provision for losses on accounts receivable 40,000 72,374 45,000 Deferred Taxes 43,000 40,000 (87,000) (Gain) loss on disposal of assets (264) (623) 505 Increase (decrease) from changes in: Accounts receivable (236,533) (148,611) 107,838 Inventory (77,621) (248,624) (374,199) Short-term investments (2,525,006) 2,131,725 (1,017,642) Prepaid expenses 9,104 (28,103) (2,729) Other assets 153,981 (18,914) (54,146) Accounts payable (126,777) 366,474 161,190 Accrued expenses 259,280 (252,875) 307,554 ---------- ---------- ---------- Net cash provided by operating activities 1,016,556 4,707,601 2,257,241 ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (418,557) (462,704) (1,005,241) Proceeds from property dispositions 5,609 33,477 8,940 Note receivable 80,000 80,000 155,000 Net cash paid for acquisition --- (471,926) --- ---------- ---------- ---------- Net cash used in investing activities (332,948) (821,153) (841,301) ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Long term debt payments (36,997) (53,740) (101,093) Proceeds from debt on new building --- --- 269,046 Dividend payments (613,922) (518,423) (456,235) Proceeds from exercise of stock options 165,012 56,139 63,525 Stock option tax benefit 18,000 11,454 149,475 Purchase of common stock for treasury (769,829) (2,138,141) --- Cash in lieu of fractional shares (1,288) --- --- ---------- ---------- ---------- Net cash used in financing activities (1,239,024) (2,642,711) (75,282) Net increase (decrease) in cash and cash equivalents (555,416) 1,243,737 1,340,658 Cash and cash equivalents at beginning of year 5,269,772 4,026,035 2,685,377 ---------- ---------- ---------- Cash and cash equivalents at end of period $4,714,356 $5,269,772 $4,026,035 ---------- ---------- ---------- ---------- ---------- ---------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: INTEREST $29,393 $43,899 $32,139 INCOME TAXES $1,568,476 $1,460,794 $1,507,575
The accompanying notes are an integral part of the financial statements. F-5 DECORATOR INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and all subsidiary companies. All significant intercompany accounts and transactions have been eliminated in consolidation. FISCAL YEAR The Company's fiscal year is a 52-53 week period ending the Saturday nearest to December 31, which results in every sixth year containing 53 weeks. Fiscal years 1996, 1995 and 1994 were 52-week periods ending December 28, 1996, December 30, 1995 and December 31, 1994. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out method) or market. PROPERTY AND DEPRECIATION Buildings and equipment are stated at cost, and depreciated on both straight-line and accelerated methods over estimated useful lives. Leasehold improvements are capitalized and amortized over the assets' estimated useful lives or remaining terms of leases, if shorter. Equipment is depreciated over 3-10 years, buildings over 20-30 years and leasehold improvements over 5-10 years. EXCESS OF COST OVER NET ASSETS ACQUIRED The excess of investment costs over the fair value of net assets related to the Haleyville Manufacturing division acquired in April, 1973 and the Liberia Manufacturing division acquired in October, 1985 are being amortized over a period of 40 years. Paragon Interiors, acquired in August, 1995 is being amortized also over a period of 40 years. Amortization of $58,786 was charged to income during fiscal year ended 12/28/96, $56,417 in fiscal year ended 12/30/95, and $54,724 in fiscal year ended 12/31/94. The Company evaluates the impairment of goodwill on the basis of whether goodwill is recoverable from the projected undiscounted net income before goodwill amortization of the related assets. CASH AND CASH EQUIVALENTS For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of the following: 1996 1995 ---- ---- General Funds $1,116,347 $4,054,772 Demand Notes 2,805,000 1,215,000 Repurchase agreements 743,009 ---- --------- --------- $4,714,356 $5,269,772 --------- --------- --------- --------- The demand notes are guaranteed by letters-of-credit. F-6 DECORATOR INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) SHORT-TERM INVESTMENTS Short-term investments are categorized as trading securities. The estimated fair values of the company's trading securities, which are the amounts reflected in the balance sheet, are based on quoted market prices. An unrealized gain of $25,204 is included in income for year ended December 28, 1996 compared to a realized gain of $125,601 for the year ended December 30, 1995. DEFERRED INCOME TAXES The Company accounts for income taxes in accordance with the Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes," which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. PER SHARE INFORMATION Per share amounts of common stock are based on the average number of common shares outstanding during each period. Fully diluted earnings per share were computed based on the assumption that the stock options were exercised. The dilutive effect of the stock options was determined using the "treasury stock" method. CREDIT RISK The Company sells into three different markets, each primarily, on thirty day terms. Within each market the Company's customers are spread over a wide geographic area. As such the Company believes that it does not have an abnormal concentration of credit risk within any one market or any one geographic area. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. FAIR VALUE OF FINANCIAL INSTRUMENTS Marketable securities are carried at fair value. All other financial instruments are carried at amounts believed to approximate fair value. STOCK SPLIT The Company declared a four-for-three stock split effective June 17, 1996. Per share and share data have been adjusted to reflect this stock split. (2) INVENTORIES Inventories consisted of the following classifications: 1996 1995 ---- ---- Raw materials & supplies $2,854,066 $2,814,309 In process & finished goods 228,938 191,075 ------- ------- $3,083,004 $3,005,383 --------- --------- --------- --------- F-7 DECORATOR INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (3) NOTES RECEIVABLE Notes receivable consist of the following: Fiscal Year-end --------------- 1996 1995 ---- ---- The note is receivable in monthly installments of $6,667, plus interest at 8%. The note is secured by the land and building sold during 1993. $140,000 $220,000 Less current portion 80,000 80,000 ------ ------ Long-term portion $ 60,000 $140,000 ------ ------ ------ ------ Maturities of notes receivable are as follows: Fiscal Year Ending Amount ------------------ ------ 1997 80,000 1998 60,000 ------ TOTAL $140,000 ------- ------- (4) LEASES The Company leases certain buildings and equipment used in its operations. Building leases generally provide that the company bear the cost of maintenance and repairs and other operation expenses. Rent expense was $248,286 in 1996, $209,958 in 1995, and $229,191 in 1994. Commitments under these leases extend through November, 2006, and are as follows: 1997 $ 209,085 1998 143,795 1999 90,564 2000 90,564 Thereafter 309,737 (5) COMMITMENTS The Company has commitments under certain employment and non-compete agreements entered into with individuals in management positions. The commitments under these agreements are payable $214,200, $214,200, and $214,200, respectively, from 1997 through 1999 and $963,900 thereafter. (6) SIGNIFICANT CUSTOMERS Sales to one customer accounted for 22.5%, 25.1%, and 31.3% of Company sales in 1996, 1995, and 1994, respectively. This customer, Fleetwood Enterprises, operates in two industries, the Manufactured Housing Industry and the Recreational Vehicle Industry. Further, purchasing decisions are made at each individual plant of that customer. The Company services many of these plants and considers each of these plants to be an independent customer. F-8 DECORATOR INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (7) LONG TERM-DEBT AND CREDIT ARRANGEMENTS Long-term debt consists of the following: 1996 1995 ---- ---- Note payable in monthly payments of $2,088 at 4% interest. Term is 15 years. This note is secured by the first mortgage on the Bloomsburg, PA building. $215,372 $230,137 Bond payable in monthly installments thru November, 2008. The interest rate is variable and is currently less than 4%. This bond is secured by the Company's Bloomsburg, PA property. 375,746 397,978 ------- ------- 591,118 628,115 Less amount due within one year 41,685 41,032 ------- ------- $ 549,433 $ 587,083 --------- --------- --------- --------- Principal payments on long-term debt for the five years subsequent to December 28, 1996 are as follows: 1997 $42,000 1998 42,000 1999 43,000 2000 43,000 2001 44,000 F-9 DECORATOR INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (8) STOCK OPTIONS At December 28, 1996 the Company had options outstanding under two fixed stock option plans, which are described below. The Company applies APB Opinion 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its fixed stock option plans. Had compensation cost for the Company's two fixed stock option plans been determined based on the fair value at the grant dates for awards under those plans consistent with the method of FASB 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below: 1996 1995 1994 ---- ---- ---- Pro forma net income $3,007,470 $2,414,678 $2,787,965 Pro forma earnings per share: Primary $1.29 $0.93 $1.06 Fully diluted $1.20 $0.87 $0.96 During the initial phase-in period of FASB 123 the pro forma disclosure may not be representative of the impact on net income in future years. Under the 1984 Incentive Stock Option Plan which expired in 1994, the Company granted options to its employees for up to 604,666 shares (less the number of shares issued under the 1979 plan). Under the 1995 Incentive Stock Option Plan, the Company may grant options to its key employees for up to 333,332 shares of common stock. Under both plans, the exercise price of the option equals the fair market price of the Company's stock on the date of the grant and an option's maximum term is 10 years. During 1996 options to purchase 166,662 shares under the 1995 Incentive Stock Option Plan were granted. The options granted in1996 vest 20% each year starting with the date of the grant. The fair value of each option grant is estimated on the date of grant using the Flexible Binomial options-pricing method with the following weighted-average assumptions used for the grants in 1996, 1995, and 1994, respectively: dividend yield of 3.6 percent for all years; expected volatility of 49.6 percent for all years; risk-free interest rate of 6.4 percent for all years; and expected life of 3.7 years for all grants. A summary of the status of the Company's outstanding stock options as of December 28, 1996, December 30, 1995, and December 31, 1994, and changes during the years ending on those dates is presented below:
1996 1995 1994 ---- ---- ---- Weighted Weighted Weighted Average Average Average Shares Exercise Shares Exercise Shares Exercise Outstanding at beginning of year 258,954 $1.86 315,320 $1.81 442,121 $1.43 Granted 166,662 $7.50 - - 20,665 $7.88 Exercised 100,360 $1.64 56,366 $1.56 147,466 $1.52 Forfeited - - - - - - ------- ------- ------- Outstanding at year-end 325,256 $4.82 258,954 $1.86 315,320 $1.81 ------- ------- ------- ------- ------- ------- Options exercisable at year-end 191,926 258,954 315,320 Weighted-average fair value of $2.63 options granted during the year The following information applies to fixed stock options outstanding at December 28, 1996: Number outstanding 325,256 Range of exercise prices $.89 to $7.88 Weighted-average exercise price $4.82 Weighted-average remaining contractual life 6.9 years
F-10 DECORATOR INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (9) INCOME TAXES A summary of income taxes is as follows: 1996 1995 1994 ---- ---- ---- Current: Federal $1,350,000 $1,169,000 $1,400,000 State 221,000 235,000 247,000 Deferred (Benefit) 43,000 40,000 (87,000) --------- --------- --------- Total $1,614,000 $1,444,000 $1,560,000 ---------- ---------- ---------- ---------- ---------- ---------- Temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities that give rise to net deferred income tax liability relate to the following: 1996 1995 ---- ---- Property and equipment, due to differences in depreciation $ 166,000 $ 129,000 Installment sale of land & building 29,000 46,000 Inventories, due to additional cost recorded for income tax purposes (11,000) (10,000) Accounts receivable, due to allowance for doubtful accounts (88,000) (87,000) Accrued liabilities, due to expenses not yet deductible for income tax purposes (37,000) (62,000) ------- ------- Net deferred income tax (asset) liability $ 59,000 $ 16,000 ------ ------ ------ ------ The net deferred income tax liability is presented in the balance sheets as follows: 1996 1995 ---- ---- Current Asset $ 136,000 $ 159,000 Long-term Liability 195,000 175,000 F-11 DECORATOR INDUSTRIES, INC. NOTES TO FINANCIAL STATEMENTS (9) INCOME TAXES (Continued) The effective income tax rate varied from the statutory Federal tax rate as follows: 1996 1995 1994 ---- ---- ---- Federal statutory rate 34.0% 34.0% 34.0% State income taxes, net of federal income tax benefit 3.3 4.2 3.8 Other (2.8) (.8) (2.2) ------ ------ ------ Effective income tax rate 34.5% 37.4% 35.6% ----- ----- ----- ----- ----- ----- (10) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FIRST SECOND THIRD FOURTH 1996 QUARTER QUARTER QUARTER QUARTER YEAR ---- ------- ------- ------- ------- ---- Net Sales $9,439,498 $10,540,139 $9,601,465 $9,068,585 $38,649,687 Gross Profit 2,336,564 2,833,395 2,539,800 2,313,834 10,023,593 Net Income 622,726 910,548 813,487 718,459 3,065,220 Earnings per Common share: Primary .27 .39 .35 .30 1.31 Fully Diluted .25 .37 .31 .29 1.22 Average Common Shares Outstanding: Primary 2,307,885 2,326,990 2,345,963 2,354,930 2,333,972 Fully Diluted 2,482,231 2,478,501 2,543,939 2,541,768 2,511,610 FIRST SECOND THIRD FOURTH 1995 QUARTER QUARTER QUARTER QUARTER YEAR ---- ------- ------- ------- ------- ---- Net Sales $8,275,431 $8,749,072 $8,560,400 $8,622,356 $34,207,259 Gross Profit 2,232,103 2,243,625 1,922,047 2,048,818 8,446,593 Net Income 680,445 677,283 524,753 532,197 2,414,678 Earnings per Common share: Primary .26 .26 .20 .21 .93 Fully Diluted .24 .24 .19 .20 .87 Average Common Shares Outstanding: Primary 2,660,425 2,596,021 2,571,030 2,514,792 2,585,568 Fully Diluted 2,897,181 2,797,437 2,767,058 2,699,463 2,790,177
F-12 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE The Board of Directors and Stockholders Decorator Industries, Inc. The audit referred to in our opinion dated February 8, 1997 of the financial statements as of December 28, 1996 and for each of the three fiscal years then ended includes the related supplemental financial schedule as listed in Item 14(a), which, when considered in relation to the basic financial statements, presents fairly in all material respects the information shown therein. /s/ Louis Plung & Company LOUIS PLUNG & COMPANY Certified Public Accountants Pittsburgh, Pennsylvania February 8, 1997 F-13 DECORATOR INDUSTRIES, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E Additions (1) (2) Charged to Charged to Balance at Costs Other Balance at Beginning and Accounts Deductions End Description of Period Expenses Described Describe of Period - ----------- --------- -------- --------- -------- --------- DEDUCTED FROM ASSETS TO WHICH THEY APPLY: ALLOWANCE FOR DOUBTFUL ACCOUNTS 1996 $229,722 $ 40,000 -0- $ 37,420(A) $232,302 1995 199,659 72,374 -0- 42,311(A) 229,722 1994 212,005 45,000 -0- 57,346(A) 199,659
(A) Write-off bad debts F-14 DECORATOR INDUSTRIES, INC. Form 10-K For Fiscal Year Ended December 28, 1996 Commission File No. 1-7753 EXHIBIT INDEX Sequentially Exhibit No. Document Numbered Page - ----------- -------- ------------- 3A Articles of Incorporation as amended to date* 3B.1 By-laws as amended to date* 10E Lease dated February 9, 1984 between Registrant, as lessee, and Leon and Eleanor Bradshaw covering property at 500 North Long Street, Salisbury, North Carolina* 10H Lease Agreement dated December 13, 1983 covering property at 101 West Linden Street, Abbotsford, Wisconsin, and assignment thereof to the registrant, as lessee, dated October 2, 1985* 10H.1 Lease Modification Agreement dated May 20, 1988 regarding Exhibit 10H* 10H.2 Lease Modification Agreement dated September 30, 1996 regarding Exhibit 10H 10K.1 1984 Incentive Stock Option Plan, as amended to date* 10M.1 Medical and Dental Reimbursement Plan, as amended to date* 10T Employment Agreement dated August 2, 1994 between the registrant and William Bassett* 10U 1995 Incentive Stock Option Plan* 10V Purchase and Sale Agreement dated March 14, 1997 between the registrant and Specialty Windows Corp. 11L Statement re computation of fully diluted income per share 24D Consent of Accountants 27 Financial Data Schedule ___________________________ *Incorporated by reference EX-10.H2 2 EXHIBIT 10.H2 LEASE MODIFICATION AGREEMENT This Lease Modification Agreement is made and entered into this 30th day of September, 1996, between ANTHONY P. KEDROWSKI (the "Lessor") and DECORATOR INDUSTRIES, INC., a Pennsylvania corporation licensed to do business as a foreign corporation in Wisconsin (the "Lessee"). W I T N E S S E T H: WHEREAS, Lessor is the owner of certain real property located in Clark County, Wisconsin, of which Lessee is presently a tenant under Lease Agreement dated December 31, 1983, and Assignment thereof from Liberia Manufacturing Corporation effective October 1, 1985, as modified by a Lease Modification Agreement dated May 20, 1988 (the "Lease"); and WHEREAS, Lessee has requested Lessor to promptly build an addition to said premises for additional storage space increasing the size of the building not less than 2,400 square feet (the "Addition"), which Lessor has agreed to do upon the terms and conditions hereafter set forth. NOW, THEREFORE, in consideration of the foregoing recitals, of the mutual covenants and agreements herein contained, and other good and valuable consideration, the parties do hereby agree as follows: 1. Lessor will, at his sole cost and expense, proceed promptly to construct an Addition containing not less than 2,400 square feet to the said premises, which does not provide for heat or electricity except for minimal lighting, to be built in accordance with the plans and specifications attached hereto and made a part hereof. The materials and workmanship to be incorporated in the Addition are to be new and of first quality. The Addition shall become part of the leased premises. 2. The Lessor agrees to complete the Addition in accordance with this Lease Modification Agreement and the plans and specifications on or before December 1, 1996, to the satisfaction of the Lessee ("Full Completion"). 3. Upon the first day of the month following Full Completion of the Addition, Lessee shall pay to Lessor as rent for said leased premises the sum of $4,316.67 per month and the sum of $4,316.67 on or before the first day of each and every consecutive month thereafter during the term of this Lease Modification Agreement. Exhibit 10H.2 4. The Term of this Lease Modification shall be for ten (10) years commencing December 1, 1996 or the first day of the month following full completion of the Addition to the satisfaction of Lessee. 5. In the event the Lessee provides written notice to Lessor that it requires heat and electricity in the Addition suitable for its manufacturing operations, the Lessor shall promptly provide same at its sole cost and expense. 6. After the premises have been fully assessed for real estate tax purposes to include the Addition, Lessee shall pay to Lessor within ninety (90) days following submission of paid bills therefore, all increases in annual real estate taxes on the leased premises in excess of $8,200. 7. During the construction of the Addition, Lessor shall do all things necessary to permit Lessee to have the complete and full enjoyment of the leased premises without disruption, dust or dirt affecting Lessee's inventory or property or any other obstruction or hindrance whatsoever. 8. Except as modified hereby, the Lease shall continue in full force and effect. In addition to any other obligation which Lessor has to repair in the Lease, Lessor shall be obligated to make all replacements or repairs to the Addition. IN WITNESS WHEREOF, the parties have caused these presents to be signed and sealed the day and year first above written. WITNESS: /s/ Anthony P. Kedrowski (SEAL) - ----------------------------- ------------------------------- Anthony P. Kedrowski ATTEST: DECORATOR INDUSTRIES, INC. By /s/ William A. Bassett - ----------------------------- ---------------------------- Secretary President (SEAL) EX-10.V 3 EXHIBIT 10.V PURCHASE AND SALE AGREEMENT AGREEMENT dated March 14, 1997, between SPECIALTY WINDOW COVERINGS CORP. an Indiana corporation, with its principal office in Elkhart, Indiana ("Seller") and joined in and consented to by THOMAS CRIPE and THOMAS M. HINES, sole shareholders of Seller ("Shareholders") A N D DECORATOR INDUSTRIES, INC., a Pennsylvania corporation with its principal office in Pembroke Pines, Broward County, Florida ("Buyer"); WITNESSETH: WHEREAS, Seller and Shareholders desire to sell and Buyer wishes to purchase certain of the business and assets, free and clear of any and all liabilities, of Seller on the terms and conditions hereinafter set forth in this Purchase and Sale Agreement ("Agreement"); NOW, THEREFORE, in consideration of their respective undertakings hereunder, the parties hereto, each intending to be legally bound, do covenant, warrant and agree as follows: 1. PURCHASE AND SALE OF PURCHASE ASSETS 1.1 PURCHASE AND SALE. On March 15, 1997, the Effective Date, and subject to the terms and conditions contained herein, Seller hereby sells, assigns, transfers and delivers to Buyer, and Buyer hereby purchases and accepts from Seller, all of Seller's assets and property rights of every kind and description whatsoever, personal, tangible or intangible, as a going concern ("Purchase Assets") with the exception of the following assets: (a) Treasury stock, the corporate seal, minute books, charter documents, capital stock record books and such of the other books and records as have to do with the organization, existence and share capitalization of Seller; (b) Rights which accrue or will accrue to Seller under this Agreement; (c) Cash; and (d) Retained inventory in the amount of approximately One Hundred Twenty-five Thousand Dollars ($125,000) ("Retained Inventory"), the amount to be finally determined promptly after the Effective Date and set forth on Appendix I. Buyer will buy at cost from Seller on an as needed basis from the Retained Inventory to fulfill customer orders with payment to be made by the 15th of the next succeeding month. Without in any way limiting the scope of the assets being transferred to Buyer hereunder, said assets include all security deposits, accounts receivable, machinery, equipment and vehicles (including those listed on Appendix II), fixtures, stock in trade, inventories of merchandise (raw, processed and finished materials), supplies, tools, furniture, designs and drawings, patents, trade marks, options, contractual rights, franchises, trade names and corporate names (including "Specialty Window Coverings"; Seller shall change its corporate name at the Closing to a dissimilar name), know-how, trade secrets, customer lists and all other tangible assets of Seller (other than the excluded assets referred to above) whether or not carried at value on the books of Seller and whether or not in the possession of Seller or others. Title to all assets to be conveyed pursuant hereto shall be good and marketable, free and clear of any and all liabilities, obligations, liens, claims, security interests and encumbrances whatsoever, except the liabilities hereinafter specifically assumed by Buyer. 1.2 CLOSING; BILL OF SALE; ETC. (a) The closing of the transactions provided for in this Agreement ("Closing") shall take place at the office of the Buyer, Suite 201, 10011 Pines Boulevard, Pembroke Pines, Florida 33024, or at such other place as Seller and Buyer shall mutually agree, at 10 o'clock a.m., local time, on or before April 6, 1997, or at such other date as may be mutually agreed upon in writing by Seller and Buyer. (b) At the Closing, Seller shall deliver to Buyer the following instruments of conveyance in recordable form: (i) Bill of Sale substantially in the form of Exhibit 1.2(b)(i) hereto; 2 (ii) Assignment of Trademarks and trade names substantially in the form of Exhibit 1.2(b)(ii) hereto. (c) Seller agrees to execute and deliver to Buyer such additional instruments, bills of sale, assignments and the like, as may be reasonably requested by Buyer, in order to more fully perfect in Buyer title to the Purchase Assets. 2. LIABILITIES OF SELLER ASSUMED BY BUYER. 2.1 At the Closing, but effective as of the Effective Date, Seller shall assign and transfer to Buyer its rights, liabilities and obligations and Buyer shall assume, pursuant to an assignment and assumption agreement substantially in the form of Exhibit 2.1 hereto for purchase orders commitments and contracts for inventory. 2.2 Buyer will not assume, or in any way be liable or responsible for any debts, claims, demands, liabilities or obligations of Seller or Shareholders (whether or not referred to in any Exhibit and/or appendix hereto), except as specifically provided in Section 2.1 above, and Seller and Shareholders represent, warrant and agree that Buyer shall not be or become liable for any debts, claims, demands, liabilities or obligations of Seller or Shareholders not expressly assumed in Section 2.1 of any kind whatsoever, whether fixed or contingent, known or unknown. Without limiting the generality of the foregoing, Buyer shall not assume (i) any purchase or sale commitments, contracts, leases, licenses, permits, supply arrangements or any other agreements or arrangements to which Seller is a party or by which it is bound, not terminable by Buyer within thirty (30) days, without premium or penalty, except as set forth on Exhibit 2.2 hereto, or unless Buyer at Closing expressly assumes any of same in writing; (ii) any liability or obligation of Seller for any personal injury or property damage claim heretofore or hereafter made for occurrences prior to the Effective Date; (iii) any liability or obligation of Seller for any claim heretofore or hereafter made in respect of any express or implied representation, warranty, agreement or guarantee made (or claimed to have been made) by Seller, or imposed or asserted to be imposed by operation of law, in respect of any product sold or committed to be sold by Seller at any time on or before the Effective Date; or (iv) any unpaid taxes; interest and/or penalties due or owing by Seller to any taxing or governmental authority for all periods prior to the Effective Date. 3. PURCHASE PRICE AND PAYMENT. 3.1 As consideration for the purchase of the Purchase Assets and the undertakings of Seller hereunder, Buyer shall pay Seller as follows: (a) Two Hundred Eighty Thousand Dollars ($280,000) upon execution of this Agreement to be held in escrow by the attorneys for Buyer and Seller 3 pursuant to an Escrow Agreement substantially in the form of Exhibit 3.1(a). (b) On the Closing, the sum of Two Million Eight Hundred Thousand Dollars ($2,800,000) adjusted for the following: (i) less the amount of the escrow in 3.1(a) above; (ii) less the amount of the Retained Inventory; (iii) less the inventory reserve in the amount of approximately Three Hundred Eighty-seven Thousand Dollars ($387,000) ("Inventory Reserve") as set forth on Appendix III promptly after the Effective Date; (iv) the amount by which the actual inventory taken on March 15, 1997 less the Retained Inventory and the Inventory Reserve is more or less than $560,521; and (v) the amount by which Accounts Receivable on the Effective Date are more or less than $216,346; (c) On the Additional Consideration Dates, Buyer shall pay to Seller (or if the Seller has been liquidated, to a joint bank account designated by Seller for the benefit of the Shareholders) additional consideration not to exceed an aggregated total of One Million Five Hundred Thousand and 00/100s Dollars ($1,500,000). If the Purchase Price, Additional Consideration, adjustments, purchase of Retained Inventory and bonus to Shareholders in the aggregate exceeds Three Million Eight Hundred Thousand Dollars ($3,800,000), such excess may be paid in Buyer's stock at the option of Buyer. Seller shall be entitled to receive additional consideration ("Additional Consideration") based upon the Profit of the business of Specialty ("Specialty") determined on the basis of generally accepted accounting principles, consistently applied, calculated before federal and state income taxes, inter Company charges, management fees or corporate overhead of Buyer, but after bonuses, interest charges for loans or advances by Buyer calculated at two percent (2%) above the "Prime Rate" as quoted in the WALL STREET 4 JOURNAL, allocable share of bank charges and fees of certified public accountants and attorneys (percentage of such costs to sales shall not exceed the percentage of such costs to sales of Seller for the year ending December 31, 1996), and, in addition, shall include extraordinary attorneys' fees incurred by Specialty and not by Buyer or its other subsidiaries and depreciation of fixed assets used by Specialty (which annual charge shall not exceed $32,353 on existing fixed assets, plus depreciation on new fixed assets, maintenance, operating and insurance costs, rent and real estate taxes attributable to the existing building and the building being built and to be leased by Specialty, plus a charge for expenses paid by Buyer on behalf of Specialty provided such payment is no greater than would have been paid by Specialty, during the 12-month periods ending April 4, 1998 and April 3, 1999 ("Periods of Operation"). For the purpose of this Section 3.1(b), the term Specialty, shall mean the subsidiary, division or other entity to be formed or used by Buyer for the purpose of operating the business of Seller with the assets being purchased hereunder. Buyer may withdraw from working capital sums equal to the quarterly profit of Specialty. At its option Buyer shall lend funds to Specialty for operations. Interest shall be charged by Buyer on the amount by which Specialty's operating account is in excess of a negative $150,000. The Additional Consideration shall be determined as follows: An amount equal to that which Profits, as determined above, for each of the 12 month periods exceeds the $250,000 threshold amount shall be paid as Additional Consideration. Profit of less than $250,000 for the 12 months ending April 4, 1998 will be considered a deficiency to be added to the threshold amount for the 12 months ending April 3, 1999. Notwithstanding anything herein to the contrary, the aggregate Additional Consideration shall not exceed $1,500,000. The Additional Consideration shall be separately determined for each of the above Periods of Operation and shall be paid on May 18, 1998 and May 17, 1999 ("Additional Consideration Dates"). 5 All calculations of Profit shall be prepared in accordance with the provisions hereof and in accordance with generally accepted accounting principles applied on a consistent basis. No additional employees will be hired without the written mutual approval of Buyer and Seller. No bonuses or increases or decreases in compensation shall be made which are inconsistent with past practices without the written mutual approval of Buyer and Seller. The Seller shall be entitled to receive copies of the calculations of Profit so prepared by Buyer. In the event of any disagreement by Seller with respect to any determination of Profit, Seller may, at its cost, designate its present Certified Public Accountants to attempt to adjust such disagreement with Buyer's Certified Public Accountant; in the event Seller's and Buyer's Certified Public Accountants cannot amicably adjust such disagreement, then Seller's and Buyer's Certified Public Accountants shall designate a third independent Certified Public Accountant, acceptable to both of them. to arbitrate the disagreement, and the decision of such arbitrator thereon shall be final and binding on the parties. All fees and expenses relating to the services of the arbitrator shall be paid by the party against whom the arbitrator's decision is made, or pro rated in accordance with a determination which is allocated between the parties. 3.2 The Purchase Price shall be allocated among the Purchase Assets in accordance with the allocation statement (the "Allocation Statement") attached hereto as Exhibit 3.2 which parties acknowledge is in accordance with Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"). Buyer and Seller each agree to prepare and file on a timely basis the Internal Revenue Service Form 8594, setting forth an allocation of such Purchase Price, pursuant to the Allocation Statement. Buyer and Seller further agree to report this transaction for federal income tax purposes in accordance with the Allocation Statement and each party agrees to act in accordance with such Allocation Statement in the course of any tax audit, tax review or tax litigation concerning such party and relating thereto. Neither Seller nor Buyer will assert that the allocation set forth in the Allocation Statement was not separately bargained for at arm's length and in good faith. No later than ten (10) days prior to the filing of their respective Forms 8594 relating to this transaction, each party shall deliver to the other party a copy of its Form 8594. 6 4. FINANCIAL STATEMENTS. 4.1 Seller has heretofore submitted to Buyer its Financial Statements for the fiscal year ended December 31, 1996, certified by the President of Seller, attached as Appendix IV hereto. Said Financial statement was prepared by Seller in accordance with generally accepted accounting principles, applied on a consistent basis. In the preparation of said Financial statement: (a) only non-contested, bona fide fully collectible accounts receivable incurred in the ordinary course of business was included, less normal allowance for doubtful accounts. Seller shall prepare a detailed list of all such receivables as of the Effective Date, in conformity with the foregoing, which list shall be delivered to Buyer promptly after the Effective Date as Appendix V hereto; (b) inventory of merchandise which is of quality, usable and saleable in the normal course of the business of Seller, valued at its cost or market, whichever is lower, and the value of all items heretofore written off or not presently specified or deemed by Seller to be obsolete or below standard shall be excluded. Representatives of Seller and Buyer shall take inventory commencing March 15, 1997, and shall prepare a list and value thereof as Appendix VI to this Agreement promptly after the Effective Date. 4.2 In the event of any disagreement by Buyer with respect to any determination of the inventory and/or accounts receivable, Buyer may, at its cost, designate its present Certified Public Accountants to attempt to adjust such disagreement with Seller's Certified Public Accountants; in the event Seller's and Buyer's Certified Public Accountants cannot amicably adjust such disagreement, then Seller's and Buyer's Certified Public Accountants shall designate a third independent Certified Public Accountant, acceptable to both of them, to arbitrate the disagreement, and the decision of such arbitrator thereon shall be final and binding on the parties. All fees and expenses relating to the services of the arbitrator shall be paid by the party against whom the arbitrator's decision is made, or pro rated in accordance with a determination which is allocated between the parties. 5. ADJUSTMENTS. 5.1 Buyer shall have the right of Adjustment and setoff (i) against the Additional Consideration to be paid pursuant to Section 3 for claims made by reason of any breach of any covenant, representation or warranty of Seller and Shareholders for all sums in excess of $10,000 in the aggregate; and (ii) by an amount equal 7 to any of the accounts receivable conveyed to Buyer by Seller which are not collected by January 3, 1998. Accounts receivable not collected by Buyer as above provided shall be assigned to Seller. 5.2 Buyer shall pay Shareholders a bonus equal to the Reserve Inventory less the sum of such inventory and inventories acquired by Buyer pursuant to Seller's purchase orders, commitments and contracts not used by Buyer by January 3, 1998. Payments will be made no later than March 15, 1998. 5.3 Inventories not used by Buyer by January 3, 1998 but used by Buyer prior to January 2, 1999 shall be paid for no later than March 15, 1999. Any remaining inventory shall be returned to Seller which will be permitted to dispose of said inventory provided Seller and/or Shareholders do not make drapes, window blinds or shades and does not sell such inventory to Specialty's customers. Specialty shall have the right of first refusal to purchase such inventory. 6. COVENANTS, REPRESENTATION AND WARRANTIES OF SELLER AND SHAREHOLDERS. Seller and Shareholders represent and warrant to Buyer now and as of the Effective Date and the Closing Date as follows: 6.1 Seller has, and upon the execution and delivery of this Agreement by the parties hereto, will on the Effective Date and Closing Date, transfer to Buyer good, indefeasible and marketable title to all the Purchase Assets, free and clear of any and all liabilities, obligations, liens, claims, charges, pledges, title retention or other security arrangements, encumbrances or other interests of third parties of any nature whatsoever, except as expressly assumed by Buyer pursuant to Section 2 above. 6.2 The Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; the Seller has all requisite corporate power to enter into this agreement and to perform its obligations hereunder; and the Seller has all requisite corporate power and authority to own, lease and operate its properties as now owned, leased and operated, to carry on its business as now being conducted and is duly qualified in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary. 6.3 The execution, delivery and performance by Seller of this Agreement and the transactions contemplated hereunder have been and will on the Effective and Closing Date be duly authorized by all necessary corporate action on its part, and Seller has and on the Effective Date will have full right and power to sell, assign, transfer and deliver the Purchase Assets to Buyer as provided hereunder. 6.4 This Agreement has been duly executed by the Seller and is a valid, legally binding and enforceable obligation of the Seller, except as the same may be limited or otherwise affected by 8 applicable bankruptcy, insolvency or other laws affecting creditors' rights or contractual obligations generally. 6.5 The trademarks and trade names set forth on Exhibit 1.2(b)(ii) are and will on the Effective Date and Closing Date be owned by Seller and Seller has no knowledge of any claim which questions the ownership or validity thereof. 6.6 Except as set forth in Exhibit 6.6 hereto, no license, permit, order, adoption, consent or approval of any governmental or regulatory body (collectively, the "Permits") is or will on the Effective Date and Closing Date be required to conduct the business being acquired by Buyer hereunder as the same is now being conducted. All Permits which are material to the conduct of the business being acquired by Buyer hereunder are and will on the Effective Date and Closing Date be in full force and effect assignable to Buyer and no proceeding is pending or threatened to revoke or limit any such Permit. 6.7 Seller's relationship with its customers, employees and suppliers in connection with the business being acquired by Buyer hereunder are and will on the Closing Date be consistent with a commercially reasonable business relationship in all material respects. No employee, supplier or customer, individually or in the aggregate, material to such business, has or have indicated any intention to terminate or modify any of such relationships. Seller agrees to cooperate with Buyer to preserve for the benefit of Buyer the relationships with Seller's employees, customers and suppliers and others having business relations with it with respect to the business being acquired by Buyer. It is understood and agreed that certain present employees of Seller may be employed by Buyer after the Effective Date. Seller agrees that it will release any of such employees so employed from any obligations any of them may then have to serve as a director, officer and/or employee of Seller. 6.8 There are and will on the Effective Date be no unpaid taxes, interest and/or penalties due, and Buyer is not assuming and Seller will indemnify Buyer for any liability for any unpaid taxes, interest and/or penalties due or owing, by Seller to any taxing or governmental authority as of the Effective Date (including any sales taxes in respect of sales made through the Effective Date). 6.9 Seller does not maintain any employee plans other than a health plan as set forth in Exhibit 6.9. 6.10 Seller is not a party to nor threatened with any litigation or judicial, administrative or arbitration proceeding. 6.11 The machinery, equipment, office equipment, fixtures, trucks and autos presently being used in the business which is being acquired by Buyer hereunder are and will on the Effective Date be in good operating condition and repair, ordinary wear and tear excepted, and Seller has not received any notice that any of the same is in violation of any existing law or any health, pollution, safety or other ordinance, code or regulation. 9 6.12 Except for losses, claims, damages and expenses adequately covered by Seller's insurance and which losses, claims, damages and expenses are disclosed on Exhibit 6.12, there are not (a) any liabilities of Seller, fixed or contingent, asserted or unasserted, arising out of or based upon incidents occurring on or before the date hereof with respect to any product liability, breach of warranty or any similar claim that relates to any product sold by Seller to others on or before the date hereof, or (b) any liabilities of Seller, fixed or contingent, asserted or unasserted, arising out of or based upon incidents occurring on or before the date hereof with respect to any claims for the breach of any express or implied product warranty, outstanding recalls or any other similar claim that relates to any product sold or manufactured by Seller on or before the date hereof, or any product defects which could give rise to any such liabilities, claims, or recalls. Exhibit 6.12 contains a complete listing of product liability and breach of warranty claims against Seller to the date hereof. Buyer shall notify Seller of any warranty claims under this Section 6.12 and shall, to the extent possible, attempt to follow Seller's policy in settling such claims. 6.13 Seller shall maintain all existing casualty and liability insurance ("Insurance") until date of Closing. A list of such Insurance is attached as Exhibit 6.13. 6.14 There is not pending or threatened any labor dispute, strike or work stoppage involving employees of Seller which affects or which may affect the business of Seller or which may interfere with its continued operations. There is not pending or threatened any charge or complaint against Seller by the National Labor Relations Board or any representative thereof. There have been no strikes, walkouts or work stoppages involving employees of Seller in the last three years. 6.15 Seller and the real properties referred to in Section 9(a) are in compliance with all applicable federal, state and local laws and regulations concerning the environment and occupational safety, including without limitation, the United States Toxic Substances Control Act, the United States Comprehensive Environment Response and Liability Act of 1980 (CERCLA), the United States Resource Conservation Recovery Act (RCRA), the United States Clean Water and Clear Air Acts and the Americans with Disability Act. There are no environmental liens on any of the Purchase Assets or real properties of Seller or Shareholders. No governmental actions have been taken or, to the best knowledge of Seller and Shareholders, are in process. A list of all environmental investigations, reports, studies, audits or technical reviews which are in the possession of Seller or Shareholders or, to their knowledge in relation to the real properties referred to in Section 9(a), is contained in Exhibit 6.15. Seller or Shareholders shall furnish copies of all such environmental materials listed in Exhibit 6.15 to Buyer on or before the Effective Date. 6.16 None of the information and documents furnished or to be furnished by Seller to Buyer or any of its representatives in 10 connection with the execution, delivery and closing of this Agreement is or will be on the Effective Date and Closing Date or thereafter be false or misleading or contains or will contain any untrue statement of a fact or omits or will omit to state any fact required to be stated to make the statements therein not misleading. 7. REPRESENTATION AND WARRANTIES OF BUYER. 7.1 Buyer is and will on the Effective Date and Closing Date be a corporation validly organized, existing and in good standing under the laws of the Commonwealth of Pennsylvania. 7.2 The execution, delivery and performance by Buyer of this Agreement and the transactions contemplated hereunder have been and will on the Effective Date and Closing Date be duly authorized by all necessary corporation action on its part, and Buyer has the full right and power to purchase and receive the Purchase Assets from Seller as provided hereunder. This Agreement constitutes the valid and binding obligation of Buyer enforceable in accordance with its terms. 8. INVESTIGATION BY BUYER. During the period from the date of this Agreement to three (3) years after the Closing Date, Buyer shall be given free access to the offices, plants, records, files, stock books, minute books, books of account and copies of tax returns of the Seller and Seller's Public Accountants work papers for the purpose of conducting an investigation of its financial condition, corporate status, liabilities, contracts, business operations, property and title thereto, litigation patents, trademarks, copyrights and all other matters relating to its business, properties and assets, through its employees or independent public accountants or outside business consultants, provided, however, that such investigation shall be conducted in a manner that does not unreasonably interfere with its normal operations and employee relationships. The Seller shall cause its personnel to assist Buyer in making such investigation and shall cause its counsel, accountants, engineers, employees and other representatives to be available to Buyer for such purposes. During such investigation Buyer shall have the right to make copies of such records, files, tax returns and other materials as it may deem advisable. If this Agreement is not consummated as provided herein, Buyer and its representatives shall treat all information obtained in such investigation as confidential and shall return to the Seller all copies made by Buyer and its representatives of material belonging to the Seller. 9. ADDITIONAL AGREEMENTS AT CLOSING. At Closing, the parties shall enter into the following agreements: (a) Two (2) lease agreements for real property owned solely by the Shareholders in fee simple without liens or other encumbrances except mortgages, which provide Tenant non- 11 disturbance clauses, in form similar to that attached as Exhibit 9(a) for the 20,000 square foot building at 1655 Gateway Court, Elkhart, Indiana 46514, and the 15,000 square foot adjacent building being built, each providing, INTER ALIA, for a five (5) year term at a rental of $2.40 per square foot. The Lease shall provide for two 5-year options, the first at a rental rate of $2.60 per square foot, and the second at a rental rate of $3.00 per square foot. The Lease shall contain a right of first refusal and an option to buy at $800,000. (b) An Employment Agreement with each Shareholder for a term of two (2) years at an annual salary of Sixty Thousand and 00/100s Dollars ($60,000) payable monthly, plus existing medical insurance, which employment agreements are made a part hereof and marked Exhibit 9(b). (c) An Agreement by Seller and Shareholders not to compete for a term of five (5) years after the expiration of the term of the Employment in 9(b) above. The agreement shall be in the form attached hereto, made a part hereof and marked Exhibit 9(c). The agreement not to compete by Seller and Shareholders is a condition precedent to Buyer's entering into this Purchase and Sale Agreement, forms a part of the consideration being paid by Buyer therefor and is subject to a right of setoff by Buyer in the event of a breach of default hereunder. 10. CONDUCT OF BUSINESS PENDING CLOSING. During the period from the date hereof to the Effective Date, Seller shall conduct its operations according to its ordinary and usual course of business and shall maintain its records and books of account in a manner that fairly and correctly reflects its income, expenses and liabilities in accordance with generally accepted accounting principles consistently applied, using the accounting methods previously used by Seller. During such period Seller shall not without the written consent of Buyer: (a) Pay or incur any obligation or liability, absolute or contingent, other than current liabilities incurred in the ordinary and usual course of business; (b) Incur any increased indebtedness for borrowed money (except for endorsement, for collection or for deposit, of negotiable instruments received in the ordinary and usual course of 12 business), assume, guarantee, endorse or otherwise as accommodation become responsible for obligations of any other individual, firm or corporation, or make any loans or advances to any individual, firm or corporation; (c) Declare or pay any dividends or make any payment or distribution to stockholders as such, issue any capital stock or purchase or otherwise acquire for value any of its outstanding capital stock or grant options, warrants or rights to purchase any shares of its capital stock; (d) Mortgage, pledge or subject to lien or other encumbrance any of its properties or assets; (e) Sell or transfer any of its properties or assets except in the ordinary course of business, or cancel, release or assign any indebtedness owed to it or any claims held by it; (f) Make any material change in its insurance, advertising, franchise or sales representation commitments or arrangements, or enter into (i) any sales agency agreement not subject to termination without liability on notice of 60 days or less; (ii) any contract for the purchase or sale of any materials, products or supplies other than such contracts incurred in the ordinary and usual course of business; (iii) any contract which contains an escalator, renegotiation or redetermination clause or which commits it for a fixed term; (iv) any management or consultation agreement; (v) any lease, license or royalty agreement; or (vi) any other agreement not in the usual and ordinary course of business: (g) Increase in any manner the compensation of any of its officers or executive employees, or pay or agree to pay any pension or retirement allowance to any of such officers or employees; or (h) Take any action which would materially interfere with the ability of Seller to perform or which, would materially prevent performance of this Agreement. 11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER. The obligations of the Seller under this Agreement are subject to the satisfaction at or prior to the Closing Date of each of the following conditions: 13 11.1 The representations and warranties of the Buyer herein contained shall be true and correct on and as of the Effective Date, with the same force and effect as though made on and as of such date, except as affected by the transactions contemplated hereby. 11.2 The Buyer shall have performed all obligations and agreements and complied with all covenants and conditions contained in this Agreement to be performed or complied with by it at or prior to the Effective Date and Closing Date. 11.3 The Seller shall have received an opinion of counsel for the Buyer, dated the Closing Date, satisfactory in form and substance to the Seller and its counsel, to the effect that: (a) the Buyer is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has all requisite corporate power and authority to own, lease and operate its property, to carry on its business and to enter into this Agreement and perform its obligations hereunder. (b) The execution, delivery and performance of this Agreement by the Buyer and the consummation of the transactions contemplated hereby have been duly and effectively authorized and ratified by all necessary corporate action on the part of the Buyer. (c) This Agreement has been duly executed by the Buyer and is a valid, legally binding and enforceable obligation of the Buyer, except as the same may be limited or otherwise affected by applicable bankruptcy, insolvency or other laws affecting creditors' rights or contractual obligations generally. 12. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer under this Agreement are subject to the satisfaction at or prior to the Closing Date of each of the following conditions. 12.1 The representations and warranties of the Seller herein contained shall be true and correct on and as of the Effective Date with the same force and effect as though made on and as of such date, except as affected by transactions contemplated hereby. 12.2 The Seller shall have performed all obligations and agreements and complied with all covenants and conditions contained in this Agreement to be performed or complied with by it at or prior to the Effective Date and Closing Date. 14 12.3 The Buyer shall have received an opinion of counsel for the Seller, dated the Closing Date, in form and substance satisfactory to the Buyer and its counsel, to the effect that: (a) the Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; the Seller has all requisite corporate power to enter into this Agreement and to perform its obligations hereunder; and the Seller has all requisite corporate power and authority to own, lease and operate its properties as now owned, leased and operated, to carry on its business as now being conducted and is duly qualified in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary. (b) The execution, delivery and performance of this Agreement by the Seller and the consummation of the transactions contemplated hereby have been duly and effectively authorized by all necessary corporate action on the part of the Seller. (c) This Agreement has been duly executed by the seller and is a valid, legally binding and enforceable obligation of the Seller, except as the same may be limited or otherwise affected by applicable bankruptcy, insolvency or other laws affecting creditors' rights or contractual obligations generally. (d) There are no actions, suits or proceedings pending or, to the best of its knowledge, threatened against or affecting the Seller at law or in equity or before or by any United States, state, municipal or other governmental or non-governmental department, commission, board, bureau, agency, or instrumentality, nor does such counsel know of any facts which would provide a basis for any such action, suit or proceeding. (e) There are no material controversies pending or, to the best of its knowledge, threatened between the Seller and any of its employees. (f) The documents and instruments delivered by the Seller on the Closing Date are effective to sell, convey and assign good and marketable title to the assets and property to be purchased by the Buyer hereunder and assign to Buyer all of the Seller's rights under the 15 contracts and other agreements to be transferred and assigned hereunder. 13. TERMINATION. 13.1 This Agreement may be terminated by Buyer under any of the following circumstances by notice given to Seller on or before the Effective Date: (a) The Seller shall suffer any loss from fire, flood, explosion or other casualty which substantially affects the conduct of their business or, irrespective of insurance, the value of their assets. (b) Buyer shall learn of any fact or condition with respect to the business, properties, assets or earnings of the Seller which is materially at variance with one or more of the warranties or representations of the Seller set forth in this Agreement. (c) Seller shall have failed to obtain prior to Closing any Certificates or consents of third parties required hereunder. 14. INDEMNIFICATION. 14.1 Seller and Shareholders shall indemnify and hold harmless Buyer from and against and in respect of (i) any and all liabilities and obligations to any creditors of the Seller or arising out of any transaction entered into by Seller or other facts or circumstances arising prior to the Effective Date and not expressly assumed by Buyer pursuant to Section 2, including without limitation (a) claims arising under the Bulk Sales Act, (b) product liability and breach of warranty claims with respect to inventory sold, manufactured or shipped by Seller prior to the Effective Date, (ii) any and all loss, damage or deficiency resulting from any misrepresentations, breach of warranty or non-fulfillment of any covenant or agreement on the part of Seller under this Agreement and (iii) all actions, suits, proceedings, demands ' assessments, judgments, costs and expenses (including reasonable attorneys' fees) incident to the foregoing. 14.2 Seller shall indemnify and hold Buyer harmless from and against and in respect of liability to third parties or with respect to clean-up, removal or abatement of hazardous material resulting from dumping, violation of environmental laws or other condition existing on the Effective Date, including reasonable attorneys' fees, costs and expenses. 14.3 Buyer shall indemnify and hold harmless Seller from and against and in respect of any and all liabilities and obligations of Buyer arising out of any transaction entered into by Buyer after the Effective Date, any and all loss, damage or deficiency resulting from any misrepresentations, breach of 16 warranty or nonfulfillment of any covenant or agreement on the part of Buyer under this Agreement and any and all actions, suits, proceedings, demands, assessments, judgments, costs and expenses (including reasonable attorneys, fees) incident to the foregoing. 14.4 No indemnification pursuant to Sections 14.1 and 14.2 shall be required to be made unless written notice of a request for indemnification is given on or before April 3, 1999. 15. BOOKS AND RECORDS. The Parties shall each have the right, at their own expense, at any time or from time to time after Closing, during reasonable business hours upon reasonable notice, to inspect and make copies of or extracts from any of the books and records relating to the business of Seller being acquired hereunder in the possession of the other, including, without limitation, all books and records relating to the Purchase Assets being acquired and the liabilities being assumed by Buyer hereunder. 16. FINDERS' FEES. The Parties each represent and warrant to the other that they have not retained any broker or other representative or agreed to pay any fee or commission to any agent, finder or broker, either in the nature of a finder's, originator's or broker's fee or otherwise in connection with the subject matter of this Agreement and the transactions contemplated hereunder. 17. COSTS. Except as otherwise provided herein, the Parties agree that each of them shall bear their own direct and indirect expenses, including attorneys' and accountants' fees, incurred in connection with the negotiation and preparation of this Agreement and the consummation and performance of the transactions contemplated hereby. 18. APPORTIONMENTS. 18.1 All pay and other employee benefits attributable to employees of Seller whom Buyer employs will be prorated over the period covered thereby between the parties. 18.2 All other costs and expenses shall be prorated over the period covered thereby between the parties. 18.3 Any amounts due from Seller in respect of such apportionment shall be paid on the Closing Date. 19. ARBITRATION. In the event of any dispute between the parties hereto respecting any matter or thing having to do with this Agreement or the terms and provisions and the payments required hereunder, the matter in dispute shall be submitted to an expedited arbitration in 17 the City of Indianapolis, State of Indiana, under the rules then in force of the American Arbitration Association before a panel of three arbitrators, with pre-arbitration discovery permitted. Judgment on any award rendered in favor of either party shall be final and binding and may be entered into any court having jurisdiction thereof from which there shall be no appeal. No arbitrator shall have the power to alter, disregard or amend any of the provisions of this Agreement. The costs, expenses and reasonable attorneys' fees of the successful party incurred in connection with any such arbitration shall be included as part of any such award. If the arbitrator shall determine that, under the circumstances, it would be unfair or unreasonable for one party to bear all such costs and expenses, the arbitrator may award a different allocation with respect to the responsibility for the payment of such costs and expenses. 20. NOTICES. Any notice, request or other communication to be given by either party hereunder to the other shall be in writing and shall be given by certified or registered mail, postage prepaid, return receipt requested, addressed (until another address is supplied to the other party by the addressee) as follows: If give by Buyer to: Thomas M. Hines 3119 Cherrytree Lane Elkhart, Indiana 40514 and Thomas Cripe 1431 Kilbourn Elkhart, Indiana 46314 with a copy to: Rebecca Butler, Esquire 221 W. Lexington Avenue Elkhart, IN 46514 If given by Seller to: Decorator Industries, Inc. 10011 Pines Blvd., Suite 201 Pembroke Pines, FL 33024 Attention: William Bassett, President 18 with a copy to: Jerome B. Lieber, Esquire KLETT LIEBER ROONEY & SCHORLING 40th Floor, One Oxford Centre Pittsburgh, PA 15219 and shall be deemed delivered at the close of business on the date shown on the receipt therefor as the date of the delivery to or rejection by the addressee thereof. 21. MISCELLANEOUS 21.1 This Agreement shall not be assignable by either party hereto without the written consent of the other party except that Buyer may assign this Agreement, in whole or in part, to a wholly-owned subsidiary of Buyer without the consent of Seller provided that Buyer shall continue to be bound hereby. 21.2 This Agreement shall be governed, interpreted, construed and enforced in accordance with the internal laws of the State of Indiana. 21.3 The respective representations and warranties of the parties to this Agreement shall survive the Closing Date. 21.4 On the Effective Date, Seller shall discontinue using the name Specialty Window Coverings Corp. Seller shall cooperate and use its best efforts to permit Buyer to use Seller's name as of the date hereof. 21.5 At any time and from time to time after the Closing Date, upon request of Buyer, Seller and Shareholders will do, execute, acknowledge and deliver, and will cause to be done, executed, acknowledged and delivered, without further consideration, all such further acts, deeds, assignments, transfers, conveyances, powers-of-attorney and assurances as may reasonably be requested for the satisfactory consummation of the transactions contemplated hereunder, including the aiding and assisting in the collection and reduction to possession of any of the Purchase Assets to be sold, transferred, assigned and delivered to Buyer as provided herein. 21.6 This Agreement, including the Appendices and Exhibits, constitutes the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties hereto with respect to the subject matter hereof. This Agreement shall not be modified, amended or changed in any respect except in writing duly signed by the authorized officers of the parties hereto. 19 21.7 This Agreement may be executed in any number of counterparts, each of which, when executed and delivered, shall have the force and effect of any original. ATTEST: SPECIALTY WINDOW COVERINGS CORP. /s/ Thomas Cripe By: /s/ Thomas M. Hines - ----------------------------- -------------------------- Secretary President WITNESS: /s/ Rebecca F. Butler /s/ Thomas M. Hines - ----------------------------- ------------------------------ Thomas M. Hines /s/ Rebecca F. Butler /s/ Thomas Cripe - ----------------------------- ------------------------------ Thomas Cripe ATTEST: DECORATOR INDUSTRIES, INC. /s/ Michael K. Solomon By: /s/ William A. Bassett - ----------------------------- ------------------------------ Treasurer President 20 EX-11.L 4 EXHIBIT 11.L DECORATOR INDUSTRIES, INC. COMPUTATION OF FULLY DILUTED INCOME PER SHARE OF COMMON STOCK FOR THE FIVE FISCAL YEARS ENDED DECEMBER 28, 1996
1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- Net income $3,605,220 $2,414,678 $2,823,770 $2,370,232 $1,528,787 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Average number of common shares outstanding 2,333,972 2,585,568 2,629,295 2,530,471 2,419,783 Dilutive effect of stock options on net income 177,638 204,609 264,974 361,791 301,415 ------- ------- ------- ------- ------- 2,511,610 2,790,177 2,894,269 2,892,262 2,721,198 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Fully diluted earnings per share: Net income $1.22 $.87 $.98 $.82 $.56 ----- ---- ---- ---- ---- ----- ---- ---- ---- ----
NOTE: Per share amounts and shares outstanding have been adjusted for a four-for-three stock split effective June 17, 1996 and a two-for-one stock split in April 1993. EXHIBIT 11-L EX-24.D 5 EXHIBIT 24.D CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in Registration Statement No. 33-47895 on Form S-8 and the Prospectus included therein of our reports dated February 8, 1997 included in the Annual Report on Form 10-K of Decorator Industries, Inc. for the fiscal year ended December 28, 1996. /s/ Louis Plung & Company LOUIS PLUNG & COMPANY Certified Public Accountants Pittsburgh, Pennsylvania March 21, 1997 EX-27 6 EXHIBIT 27
5 1,000 6-MOS AUG-30-1997 SEP-01-1996 MAR-01-1997 1298 0 7481 192 10434 19742 20148 9351 31085 7279 11542 0 3990 314 7960 31085 29344 29656 22526 22821 4132 52 561 2090 794 1296 0 0 0 1296 0.22 0.22
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