UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~July~~October 32, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-7753

DECORATOR INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania		25-1001433
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

10011 Pines Blvd., Suite #203-C, Pembroke Pines, Florida		33024
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (954) 436-8909

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ~~þ No~~ o No þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

Non-accelerated filer o Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Title of each class		Outstanding at ~~August~~November 1716, 2010
Common Stock, Par Value $.20 Per Share		3,~~137~~153,~~155~~596 shares

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DECORATOR INDUSTRIES, INC .

BALANCE ~~SHEETS~~SHEET

ASSETS	~~July~~October 32, 2010		January 2, 2010
Current Assets:	(UNAUDITED)
	(UNAUDITED)
Cash and Cash Equivalents	$	937,240	$	156,171
Current Assets:
Cash and Cash Equivalents	$	746,092	$	156,171
Accounts Receivable, less allowance for
doubtful accounts ($264,333 and $269,080)		1,~~478~~059,~~494~~174		1,164,669
Inventories		1,~~914~~858,~~515~~678		2,107,151
Income Taxes Receivable		-		1,215,000
Other Current Assets		~~438~~395,~~387~~468		366,047
Total Current Assets		4,~~768~~059,~~636~~412		5,009,038
Property and Equipment
Land, Buildings & Improvements		2,872,~~421~~422		2,872,421
Machinery, Equipment, Furniture & Fixtures and Software		7,~~012~~228,~~810~~162		7,270,508
Total Property and Equipment		910,~~885~~100,~~231~~584		10,142,929
Less: Accumulated Depreciation and Amortization		7,~~008~~017,~~020~~783		7,075,614
Active Assets, Net		23,~~877~~082,~~211~~801		3,067,315
Property Held for Sale, Net		3,132,989		3,357,565
Net Property and Equipment		6,~~010~~215,~~200~~790		6,424,880
Goodwill, less accumulated Amortization of $1,348,569		3,317,008		3,305,008
Deferred Income taxes		1,~~321~~516,000		1,053,000
Other Assets		~~365~~65,~~460~~930		378,741
Total Assets	$	15,~~782~~174,~~304~~140	$	16,170,667
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$	~~835~~629,~~231~~303	$	553,086
Current Maturities of Long-term Debt		3,~~248~~253,640		3,526,484
Checks Issued But Not Yet Presented		-		135,518
Accrued Expenses:
Compensation		~~267~~252,~~961~~488		175,311
Other		~~915~~853,~~637~~849		811,234
Total Current Liabilities		54,~~267~~989,~~469~~280		5,201,633
Long-Term Debt		~~420~~385,000		490,000
Total Liabilities		5,~~687~~374,~~469~~280		5,691,633
Stockholders' Equity
Common Stock $.20 par value: Authorized shares, 10,000,000;
Issued shares, 4,850,999 and 4,808,729		970,200		961,746
Issued shares, 4,867,440 and 4,808,729		973,488		961,746
Paid-in Capital		2,~~152~~175,~~912~~661		2,098,287
Retained Earnings		1514,~~284~~963,~~646~~634		15,731,924
		18,407,758		18,791,957
		18,112,783		18,791,957
Less: Treasury stock, at cost: 1,713,844 shares		8,312,923		8,312,923
Total Stockholders' Equity		109,~~094~~799,~~835~~860		10,479,034
Total Liabilities and Stockholders' Equity	$	15,~~782~~174,~~304~~140	$	16,170,667

The accompanying notes are an integral part of the financial statements.

DECORATOR INDUSTRIES, INC.

STATEMENTS OF EARNINGS

(UNAUDITED)

	For the Thirteen Weeks Ended										For the ~~Twenty~~Thirty-~~Six~~Nine Weeks Ended
	July 3, 2010					July 4, 2009					July 3, 2010					July 4, 2009
	October 2, 2010					October 3, 2009					October 2, 2010					October 3, 2009
Net Sales	$	43,~~699~~604,~~027~~527		100.0	%	$	54,~~677~~493,~~395~~365		100.0	%	$	812,~~719~~324,~~654~~181		100.0	%	$	1015,~~783~~276,~~033~~398		100.0	%
Cost of Products Sold		32,~~571~~846,~~530~~851		7679.0	%		43,~~446~~531,~~441~~984		78.36	%		69,~~820~~666,~~025~~876		78.24	%		812,~~833~~365,~~284~~268		8180.9	%
Gross Profit		1757,~~127,497~~676		2421.0	%		1961,~~230,954~~381		21.74	%		12,~~899~~657,~~629~~305		21.86	%		12,~~949~~911,~~749~~130		1819.1	%
Selling and Admin Expenses		1,252,297		26.6	%		1,830,651		32.2	%		2,531,466		29.0	%		4,319,641		40.1	%
Selling and Administrative Expenses		1,234,561		34.2	%		1,473,987		32.8	%		3,766,027		30.6	%		5,793,628		37.9	%
Operating Loss		(~~124~~476,~~800~~885	)	-213.62	%		(~~599~~512,~~697~~606	)	-1011.54	%		(~~631~~1,~~837~~108,722	)	-79.20	%		(2,~~369~~882,~~892~~498	)	-2218.08	%
Other Income (Expense)
Interest, Investment and
Other Income		54,~~827~~823		0.1	%		87,~~303~~702		0.12	%		1519,~~075~~898		0.2	%		1119,~~934~~636		0.1	%
Interest Expense		(4443,~~784~~950	)	-1.02	%		(3234,~~787~~623	)	-0.68	%		(98142,~~516~~466	)	-1.2	%		(69103,~~152~~775	)	-0.67	%
Loss Before Income Taxes		(~~163~~516,~~757~~012	)	-314.53	%		(~~624~~539,~~181~~527	)	-1112.0	%		(~~715~~1,~~278~~231,290	)	-810.20	%		(2,~~427~~966,~~110~~637	)	-2219.54	%
Provision for Income Taxes		(60195,000	)	-15.34	%		(~~258~~71,000	)	-41.6	%		(~~268~~463,000	)	-3.18	%		(~~770~~841,000	)	-75.15	%
Net Loss	$	(~~103~~321,~~757~~012	)	-28.29	%	$	(~~366~~468,~~181~~527	)	-610.4	%	$	(~~447~~768,~~278~~290	)	-56.12	%	$	(12,~~657~~125,~~110~~637	)	-1513.49	%
EARNINGS PER SHARE
Basic	$	(0.0310	)			$	(0.1216	)			$	(0.1425	)			$	(0.5671	)
Diluted	$	(0.0310	)			$	(0.1216	)			$	(0.1425	)			$	(0.5671	)
Weighted Average Number of Shares Outstanding
Basic		3,~~123~~140,~~790~~407					23,~~987~~022,~~495~~493					3,~~111~~121,~~987~~460					2,~~970~~987,~~528~~849
Diluted		3,~~123~~140,~~790~~407					23,~~987~~022,~~495~~493					3,~~111~~121,~~987~~460					2,~~970~~987,~~528~~849

The accompanying notes are an integral part of the financial statements.

DECORATOR INDUSTRIES, INC STATEMENTS OF CASH FLOWS (UNAUDITED)

(UNAUDITED)

	For the Thirty-Nine Weeks Ended
	October 2, 2010			October 3, 2009
Cash Flows From Operating Activities:
Net Loss	$	(768,290	)	$	(2,125,637	)
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activities
Depreciation and Amortization		248,549			363,921
Provision for Losses on Accounts Receivable		50,000			72,651
Deferred Taxes		(463,000	)		(841,000	)
Stock-Based Compensation		23,947			15,280
Loss/(Gain) on Disposal of Assets		(20,067	)		77,976
Noncash charges for asset impairment		-			365,500
Increase/(Decrease) from Changes in:
Accounts Receivable		55,495			36,737
Inventories		248,473			1,747,588
Income Taxes Receivable		1,215,000			-
Prepaid Expenses		(29,421	)		(204,211	)
Other Assets		312,811			(73,545	)
Accounts Payable		76,217			(196,680	)
Accrued Expenses		130,823			(898,190	)
Net Cash Provided by/(Used in) Operating Activities		1,080,537			(1,659,610	)

Cash Flows From Investing Activities:
Net cash paid for acquisitions		(23,032	)		(21,410	)
Capital Expenditures		(299,641	)		(109,144	)
Proceeds from Property Dispositions		280,250			1,462,225
Net Cash Provided by/(Used in) Investing Activities		(42,423	)		1,331,671

Cash Flows From Financing Activities:
Long-term Debt Payments		(90,000	)		(90,000	)
Change in Checks Issued but Not Yet Presented		(135,518	)		17,941
Net Borrowings under Line-of-Credit Agreement		(287,844	)		430,400
Issuance of Stock for Directors Trust		57,249			65,109
Proceeds from Directors' Trust Stock Purchase		7,920			-
Net Cash Provided by/(Used in) Financing Activities		(448,193	)		423,450

Net Increase in Cash and Cash Equivalents		589,921			95,511
Cash and Cash Equivalents at Beginning of Year		156,171			16,499

Cash and Cash Equivalents at End of Period	$	746,092		$	112,010

Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Interest	$	145,623		$	100,991
Income Taxes	$	-		$	-

Increase in Acquisition Cost/Goodwill	$	12,000		$	42,410
Working Capital, other than Cash		11,032			(21,000	)
Net Cash Paid for Acquisition/Goodwill	$	23,032		$	21,410

	For the Twenty-Six Weeks Ended
	July 3, 2010			July 4, 2009
Cash Flows From Operating Activities:
Net Loss	$	(447,278	)	$	(1,657,110	)
Adjustments to Reconcile Net Loss to Net Cash
Provided by/(Used in) Operating Activities
Depreciation and Amortization		164,085			261,832
Provision for Losses on Accounts Receivable		50,000			47,651
Deferred Taxes		(268,000	)		(770,000	)
Stock-Based Compensation		16,160			15,280
Loss/(Gain) on Disposal of Assets		(19,186	)		88,128
Noncash charges for asset impairment		-			365,500
Increase/(Decrease) from Changes in:
Accounts Receivable		(363,825	)		(383,680	)
Inventories		192,635			1,258,315
Income Taxes Receivable		1,215,000			-
Prepaid Expenses		(72,340	)		(207,092	)
Other Assets		13,281			(32,138	)
Accounts Payable		282,145			29,728
Accrued Expenses		208,085			(853,274	)
Net Cash Provided by/(Used in) Operating Activities		970,762			(1,836,860	)
Cash Flows From Investing Activities:
Net cash paid for acquisitions		(23,032	)		(8,672	)
Capital Expenditures		(2,969	)		(107,244	)
Proceeds from Property Dispositions		272,750			1,451,225
Net Cash Provided by/(Used in) Investing Activities		246,749			1,335,309
Cash Flows From Financing Activities:
Long-term Debt Payments		(60,000	)		(60,000	)
Change in Checks Issued but Not Yet Presented		(135,518	)		(68,333	)
Net Borrowings/(Payments) under Line-of-Credit Agreement		(287,844	)		855,000
Issuance of Stock for Directors Trust		39,000			42,500
Purchase of Common Stock for Treasury		7,920			-
Net Cash Provided by/(Used in) Financing Activities		(436,442	)		769,167
Net Increase in Cash and Cash Equivalents		781,069			267,616
Cash and Cash Equivalents at Beginning of Year		156,171			16,499
Cash and Cash Equivalents at End of Period	$	937,240		$	284,115
Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Interest	$	97,186		$	63,008
Income Taxes	$	-		$	-
Increase in Acquisition Cost/Goodwill	$	12,000		$	21,672
Working Capital, other than Cash		11,032			(13,000	)
Net Cash Paid for Acquisition/Goodwill	$	23,032		$	8,672

The accompanying notes are an integral part of the financial statements.

DECORATOR INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

~~TWENTY~~THIRTY-~~SIX~~NINE WEEKS ENDED ~~JULY~~OCTOBER 32, 2010 AND ~~JULY~~OCTOBER 43, 2009

(UNAUDITED)

NOTE 1. In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly the Company’s financial position as of ~~July~~October 32, 2010, the changes therein for the ~~twenty~~thirty-~~six~~nine week period then ended and the results of operations for the ~~twenty~~thirty-~~six~~nine week periods ended ~~July~~October 32, 2010 and ~~July~~October 43, 2009.

NOTE 2. The financial statements included in the Form 10-Q are presented in accordance with the requirements of the Form and do not include all of the disclosures required by accounting principles generally accepted in the United States of America. For additional information, reference is made to the Company’s annual report on Form 10-K for the year ended January 2, 2010. The results of operations for the ~~twenty~~thirty-~~six~~nine week periods ended ~~July~~October 32, 2010 and ~~July~~October 43, 2009 are not necessarily indicative of operating results for the full year.

NOTE 3.

INVENTORIES

Inventories at ~~July~~October 32, 2010 and January 2, 2010 consisted of the following:

	July 3, 2010		January 2, 2010
	October 2, 2010		January 2, 2010
Raw Material and Supplies	$	1,~~568~~487,~~500~~773	$	1,653,893
In Process and Finished Goods		~~346~~370,~~015~~905		453,258
Total Inventory	$	1,~~914~~858,~~515~~678	$	2,107,151

NOTE 4. EARNINGS PER SHARE Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding. Diluted earnings per share includes the dilutive effect of stock options. No dilution is shown for all periods since the effect of the stock options on the net loss is antidilutive. In accordance with ASC Topic 260 “Earnings per Share” (formerly SFAS No. 128), the following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations:

	For the Thirteen Weeks Ended						For the Twenty-Six Weeks Ended
	July 3, 2010			July 4, 2009			July 3, 2010			July 4, 2009
Numerator:
Net loss	$	(103,757	)	$	(366,181	)	$	(447,278	)	$	(1,657,110	)
Denominator:
Weighted-average number of
common shares outstanding		3,123,790			2,987,495			3,111,987			2,970,528
Dilutive effect of
stock options on net income		-			-			-			-
		3,123,790			2,987,495			3,111,987			2,970,528
Diluted earnings per share:	$	(0.03	)	$	(0.12	)	$	(0.14	)	$	(0.56	)

Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding. Diluted earnings per share includes the dilutive effect of stock options. No dilution is shown for all periods since the effect of the stock options on the net loss is antidilutive. In accordance with ASC Topic 260 “Earnings per Share” (formerly SFAS No. 128), the following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations:

	For the Thirteen Weeks Ended						For the Thirty-Nine Weeks Ended
	October 2, 2010			October 3, 2009			October 2, 2010			October 3, 2009
Numerator:
Net loss	$	(321,012	)	$	(468,527	)	$	(768,290	)	$	(2,125,637	)
Denominator:
Weighted-average number of
common shares outstanding		3,140,407			3,022,493			3,121,460			2,987,849

Dilutive effect of
stock options on net income		0			0			0			0
		3,140,407			3,022,493			3,121,460			2,987,849

Diluted earnings per share:	$	(0.10	)	$	(0.16	)	$	(0.25	)	$	(0.71	)

NOTE 5. ASSET SALE On May 28, 2010, the Company sold its Douglas, GA facility, which had been idle since October 2008. The net proceeds from this sale were $208,360 and were used to pay down the line-of-credit with Wachovia Bank. The Company recognized a loss on the building sale of $13,077 in the second quarter of 2010.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement: The Company's Reports on Form 10-K and Form 10-Q, its Current Reports on Form 8-K, and any other written or oral statements made by or on behalf of the Company contain or may contain statements relating to future events, including results of operations, that are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent the Company's expectations or belief as to future events and, by their very nature, are subject to risks and uncertainties which may result in actual events differing materially from those anticipated. In particular, future operating results will be affected by the level of demand for recreational vehicles, manufactured housing and hotel/motel accommodations, the general economic conditions, the Company’s ability to retain or replace its line-of-credit, interest rate fluctuations, the availability of consumer credit, availability of floor-plan credit for recreational vehicle and manufactured housing retail dealers, availability of financing for manufacturers, fuel prices, competitive products and pricing pressures within the Company's markets, the Company's ability to contain its manufacturing costs and expenses, and other factors. Any forward-looking statements by the Company speak only as of the date made, and the Company undertakes no obligation to update or revise such statements to reflect events or circumstances after such date or to reflect the occurrence of unanticipated events.

FINANCIAL CONDITION

The Company’s financial ratios changed as illustrated below.

		July 3, 2010			January 2, 2010
	October 2, 2010		January 2, 2010
Current Ratio	0.81:1	~~0.90:1~~	0.96:1		~~0.96:1~~
Quick Ratio	0.44:1	~~0.54:1~~	0.56:1		~~0.56:1~~
Funded Debt to Total Capital	27.1%		2627.7%	%		~~27.7~~	%
Working Capital	$(929,868)	$	$(~~498~~192,~~833~~595)	)	$	~~(192,595~~	)

On April 20, 2010 the Company entered into a loan agreement with Crestmark Bank (Crestmark). The agreement provides up to $2,000,000 of borrowing availability to be repaid on a demand basis and is secured by the Company’s accounts receivable and inventory and their products and proceeds. Crestmark will advance up to 85% of the eligible accounts receivable. The term of the agreement is two years. The available funds will be used for working capital requirements of the Company. The interest rate on borrowed funds will be prime plus 3.50%, but will not be lower than 6.75%. Fees include a one percent commitment fee, payable monthly, and a maintenance fee equal to the greater of .4% of the average monthly loan balance or $2,500. The Company will also be responsible for other fees associated with the facility. The Company must maintain a tangible net worth of not less than $5,000,000 and its working capital ratio, excluding its debt to Wachovia Bank, must not be less than 1.20:1. At ~~July~~October 32, 2010 the tangible net worth was $56,~~973~~021,~~980~~454 and the current ratio, excluding the Wachovia debt, was 2.2116:1. The Company has not borrowed against this facility to date, but will utilize this facility for its working capital needs going forward.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

The loan balance with Wells Fargo Bank (formerly Wachovia Bank) was $3,113,640 at ~~July~~October 32, 2010. Wells ~~Wachovia~~Fargo no longer provides working capital to the Company. This ~~and this~~ loan is collateralized by five of the Company’s properties, three of which are vacant and not being utilized by the Company, and matures on December 31, 2010. The ~~Should~~Company ~~any~~reached ofan ~~this~~agreement ~~real~~in ~~estate~~principle bewith ~~sold~~Wells Fargo on November 23, 2010 to modify the ~~net~~loan ~~proceeds~~agreement. This will ~~pay~~be ~~down~~ the ~~balance~~second loan modification of the loan agreement. ByWells Fargo and the Company will work together to sell the three vacant properties collateralizing the loan with the proceeds from these sales reducing the loan balance. The remaining loan balance, but not more than $400,000 (the New Loan Balance), will be extended to December 31, ~~2010~~2015. The Company will have principal payments of $40,000 per year with a balloon payment of $200,000 due on December 31, 2015. Interest on the loan will be at prime plus 1.00% and will accrue only on the New Loan Balance beginning January 1, 2011. Principal and interest will be paid monthly. As a result of this modification agreement the Company ~~plans~~will torecognize ~~achieve~~a ~~one~~reserve orcharge ~~more~~of $419,000 in the fourth quarter. This charge represents the difference between the net book value of the ~~following:~~“Properties held for sale” and the reduction in the loan balance that Wells Fargo has agreed to make in exchange for the three vacant properties if they are not sold by December 31, 2011 or if they are sold for less than $2,700,000.

1Days Sales Outstanding (DSO) ~~Sell~~in ~~the~~accounts ~~real~~receivable ~~estate~~were ~~pledged~~26.0 days at October 2, 2010 compared to ~~Wachovia~~30.6 days and ~~reduce~~41.3 ordays ~~pay-off~~at January 2, 2010 and October 3, 2009, respectively. Net accounts receivable was $1,059,174 at October 2, 2010, compared to $1,164,669 and $2,104,868 at January 2, 2010 and October 3, 2009, respectively. The decrease in accounts receivable compared to October 3, 2009 is due to the ~~balance;~~reduced sales volumes in the current year.

Inventories were $1,858,678 at October 2), ~~Complete~~2010, ~~additional~~as ~~Sale/Leaseback~~compared ~~transactions~~to on$2,107,151 ~~real-estate;~~and $2,035,993 at January 2, 2010 and October 3, 2009, respectively. The inventory declines are due to lower sales volume.

3)Capital ~~Find~~expenditures anwere ~~alternative~~$299,641 ~~lender(s)~~for the first nine months of 2010, compared to ~~replace~~$109,144 ~~Wachovia~~for asthe ~~its~~same ~~real-estate~~period ~~lender;~~of the prior year. Included in the 2010 capital expenditures is approximately $290,000 for the capitalization of a software modification project. Capital expenditures over the remainder of the year will be nominal.

4) Negotiate with Wachovia to extend the terms of the loan.

The Company received the $855,847 balance of its Income Tax Receivable in the Second Quarter. The cash from the tax refund in addition to the available loan balance from Crestmark will provide adequate working capital for operations for the balance of 2010.

The Company’s proposed sale/leaseback of its two Alabama properties did not materialize. The Company continues to market its Alabama properties for sale/leaseback.

Days Sales Outstanding (DSO) in accounts receivable were 28.6 days at July 3, 2010 compared to 30.6 days and 40.0 days at January 2, 2010 and July 4, 2009, respectively. Net accounts receivable was $1,478,494 at July 3, 2010, compared to $1,164,669 and $2,550,285 at January 2, 2010 and July 4, 2009, respectively. The decrease in accounts receivable compared to July 4, 2009 is due to the reduced sales volumes in the current year.

Inventories were $1,914,515 at July 3, 2010, as compared to $2,107,151 and $2,525,266 at January 2, 2010 and July 4, 2009, respectively. The inventory declines are due to lower sales volume.

Capital expenditures were $2,969 for the first six months of 2010, compared to $107,244 for the same period of the prior year. Capital expenditures over the remainder of 2010 will be approximately $300,000, most of which will be for the capitalization of a software modification project.

SALES BY MARKET

The following table represents net sales to each of the three different markets that the Company serves for the periods indicated:

		For the Thirteen Weeks Ended														For the Twenty-Six Weeks Ended
(dollars in thousands)
$(000)		July 3, 2010							July 4, 2009							July 3, 2010							July 4, 2009
	For the Thirteen Weeks Ended														For the Thirty-Nine Weeks Ended
		Net			% of				Net			% of				Net			% of				Net			% of
	October 2, 2010							October 3, 2009							October 2, 2010							October 3, 2009
		Sales			total				Sales			total				Sales			total				Sales			total
	Net			% of				Net			% of				Net			% of				Net			% of
Recreational Vehicle		$	1,230			26	%		$	1,064			19	%		$	2,513			29	%		$	1,917			18	%
	Sales			total				Sales			total				Sales			total				Sales			total
Manufactured Housing			1,361			29	%			1,369			24	%			2,435			28	%			2,669			25	%
Recreational Vehicle	$	1,091			30	%		$	1,025			23	%		$	3,604			29	%		$	2,942			19	%
Hospitality			2,108			45	%			3,244			57	%			3,772			43	%			6,197			57	%
Manufactured Housing		1,094			30	%			1,299			29	%			3,529			29	%			3,968			26	%
Total Net Sales		$	4,699			100	%		$	5,677			100	%		$	8,720			100	%		$	10,783			100	%
Hospitality		1,420			40	%			2,169			48	%			5,191			42	%			8,366			55	%
Total Net Sales	$	3,605			100	%		$	4,493			100	%		$	12,324			100	%		$	15,276			100	%

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS

~~RESULTS~~Thirteen OFWeek ~~OPERATIONS~~Period Ended October 2, 2010 (“Third Quarter 2010”) compared to

Thirteen Week Period Ended ~~July~~October 3, ~~2010,~~2009 (~~Second~~“Third Quarter ~~2010~~2009”) ~~compared to~~

~~Thirteen~~The ~~Week~~following ~~Period~~table ~~Ended~~shows ~~July~~a 4,comparison ~~2009,~~of ~~(Second~~the results of operations between Third Quarter 2010 and Third Quarter 2009):

The following table shows a comparison of the results of operations between Second Quarter 2010 and Second Quarter 2009:

	Third Quarter			%			Third Quarter			%			$ Increase
	2010			of Sales			2009			of Sales			(Decrease)			% Change
Net Sales	$	3,604,527			100	%	$	4,493,365			100	%	$	(888,838	)		-19.8	%
Cost of Products Sold		2,846,851			79.0	%		3,531,984			78.6	%		(685,133	)		-19.4	%
Gross Profit		757,676			21.0	%		961,381			21.4	%		(203,705	)		-21.2	%

Selling and Administrative Expenses		1,234,561			34.2	%		1,473,987			32.8	%		(239,426	)		-16.2	%
Operating Loss		(476,885	)		-13.2	%		(512,606	)		-11.4	%		35,721			-7.0	%

Other Income/(Expense)
Interest, Investment and
Other Income		4,823			0.1	%		7,702			0.2	%		(2,879	)		-37.4	%
Interest Expense		(43,950	)		-1.2	%		(34,623	)		-0.8	%		(9,327	)		26.9	%
Loss Before Income Taxes		(516,012	)		-14.3	%		(539,527	)		-12.0	%		23,515			-4.4	%
Provision for Income Taxes		(195,000	)		-5.4	%		(71,000	)		-1.6	%		(124,000	)		174.6	%

Net Loss	$	(321,012	)		-8.9	%	$	(468,527	)		-10.4	%	$	147,515			-31.5	%

Net sales for the Third Quarter 2010 were $3,604,527, compared to $4,493,365 for the same period in the previous year, a 19.8% decrease. Sales to the Company’s recreational vehicle customers increased 15.5% in Third Quarter 2010 when compared to the same period of the prior year. This increase is net of the discontinued sewn products for the RV industry. The recreational vehicle industry reported a 19.1% increase in shipments during the Third Quarter 2010 compared to the same period of the prior year. Sales to the Company’s manufactured housing customers decreased 15.8% in Third Quarter 2010 when compared to the same period of the prior year. The manufactured housing industry showed a 1.0% increase in shipments during the Third Quarter 2010 compared to the same period of the prior year. The decline in our manufactured housing sales is the result of our customers using less of our product in each unit and using lower priced products. Sales to the Company’s hospitality customers decreased 34.5% in the Third Quarter 2010 when compared to the same period of the prior year. The decline in hospitality sales is a result of lower levels of activity for both new construction and refurbishment of hospitality properties.

	Second Quarter			%			Second Quarter			%			$ Increase
	2010			of Sales			2009			of Sales			(Decrease)			% Change
Net Sales	$	4,699,027			100	%	$	5,677,395			100	%	$	(978,368	)		-17.2	%
Cost of Products Sold		3,571,530			76.0	%		4,446,441			78.3	%		(874,911	)		-19.7	%
Gross Profit		1,127,497			24.0	%		1,230,954			21.7	%		(103,457	)		-8.4	%
Selling and Admin Expenses		1,252,297			26.6	%		1,830,651			32.2	%		(578,354	)		-31.6	%
Operating Loss		(124,800	)		-2.6	%		(599,697	)		-10.5	%		474,897			-79.2	%
Other Income/(Expense)
Interest, Investment and
Other Income		5,827			0.1	%		8,303			0.1	%		(2,476	)		-29.8	%
Interest Expense		(44,784	)		-1.0	%		(32,787	)		-0.6	%		(11,997	)		36.6	%
Loss Before Income Taxes		(163,757	)		-3.5	%		(624,181	)		-11.0	%		460,424			-73.8	%
Provision for Income Taxes		(60,000	)		-1.3	%		(258,000	)		-4.6	%		198,000			-76.7	%
Net Loss	$	(103,757	)		-2.2	%	$	(366,181	)		-6.4	%	$	262,424			-71.7	%

Cost of products sold increased to 79.0% of net sales in the Third Quarter 2010 compared to 78.6% of net sales a year ago, due to allocating the fixed cost component over a lower sales volume.

Net sales for the Second Quarter 2010 were $4,699,027, compared to $5,677,395 for the same period in the previous year, a 17.2% decrease. Sales to the Company’s recreational vehicle customers increased 58.2% in Second Quarter 2010 when compared to the same period of the prior year. The increase is net of the discontinued sewn products for the RV industry. The recreational vehicle industry reported a 79.9% increase in shipments during the Second Quarter 2010 compared to the same period of the prior year. Sales to the Company’s manufactured housing customers decreased 0.6% in Second Quarter 2010 when compared to the same period of the prior year. The manufactured housing industry showed a 16.7% increase in shipments during the Second Quarter 2010 compared to the same period of the prior year. Sales to the Company’s hospitality customers decreased 35.0% in the Second Quarter 2010 when compared to the same period of the prior year. The decline in hospitality sales is a result of lower levels of activity for both new construction and refurbishment of hospitality properties.

Cost of products sold decreased to 76.0% of net sales in the Second Quarter 2010 compared to 78.3% of net sales a year ago, due to improved labor efficiencies, reduced overhead, and was somewhat offset by higher material costs.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Selling and administrative expenses were $1,~~252~~234,~~297~~561 in the ~~Second~~Third Quarter 2010 versus $1,~~830~~473,~~651~~987 in the ~~Second~~Third Quarter 2009. ~~Included~~The reduction in ~~2009~~this ~~was~~expense ~~a facility closing cost~~ of $~~150~~239,~~000~~426 ~~and~~was adue ~~loss~~to onreductions ~~the sale of facilities of $97,714. Without these charges, the selling and administrative expense would have been $1,582,937~~ in ~~2009. The~~staff ~~second quarter of 2010 benefitted by $75,720 from various one-time gains. Without these gains, selling~~ and ~~administrative~~compensation ~~expense~~as ~~would~~well ~~have~~as ~~been~~fees ~~$1,328,017. The~~related ~~reduction~~to inthe ~~adjusted~~modification ~~expense~~ of ~~$254,920~~the ~~was~~Wachovia ~~due~~loan toagreement ~~reductions~~ in ~~staff and salary cuts~~2009. The percentage of selling and administrative expenses to net sales ~~decreased~~increased from 32.28% in the Third Quarter 2009 to 2634.62% in the Third Quarter 2010.

Net loss was $~~103~~321,~~757~~012 in the ~~Second~~Third Quarter 2010 compared to net loss of $~~366~~468,~~181~~527 in the ~~Second~~Third Quarter 2009. The decrease in the loss was due to ~~improved margin and~~ the reduction in selling and administrative ~~costs~~expense, which was somewhat offset by the 1720% decrease in net sales.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

~~Twenty~~Thirty-~~Six~~Nine Week Period Ended ~~July~~October 32, 2010, (“First ~~Six~~Nine Months 2010”) compared to

~~Twenty~~Thirty-~~Six~~Nine Week Period Ended ~~July~~October 43, 2009, (“First ~~Six~~Nine Months 2009”)

The following table shows a comparison of the results of operations between First ~~Six~~Nine Months 2010 and First ~~Six~~Nine Months 2009:

	First						First
	Six Months			%			Six Months			%			$ Increase
	Nine Months			%			Nine Months			%			$ Increase
	2010			of Sales			2009			of Sales			(Decrease)			% Change
Net Sales	$	812,~~719~~324,~~654~~181			100	%	$	1015,~~783~~276,~~033~~398			100	%	$	(2,~~063~~952,~~379~~217	)		-19.13	%
Cost of Products Sold		69,~~820~~666,~~025~~876			78.24	%		812,~~833~~365,~~284~~268			8180.9	%		(2,~~013~~698,~~259~~392	)		-2221.8	%
Gross Profit		12,~~899~~657,~~629~~305			21.86	%		12,~~949~~911,~~749~~130			1819.1	%		(50253,~~120~~825	)		-28.67	%
Selling and Admin Expenses		2,531,466			29.0	%		4,319,641			40.1	%		(1,788,175	)		-41.4	%
Selling and Administrative Expenses		3,766,027			30.6	%		5,793,628			37.9	%		(2,027,601	)		-35.0	%
Operating Loss		(~~631~~1,~~837~~108,722	)		-79.20	%		(2,~~369~~882,~~892~~498	)		-2218.08	%		1,~~738~~773,~~055~~776			-7361.35	%
Other Income/(Expense)
Interest, Investment and
Other Income		1519,~~075~~898			0.2	%		1119,~~934~~636			0.1	%		~~3,141~~262			261.3	%
Interest Expense		(98142,~~516~~466	)		-1.2	%		(69103,~~152~~775	)		-0.67	%		(2938,~~364~~691	)		4237.53	%
Loss Before Income Taxes		(~~715~~1,~~278~~231,290	)		-810.20	%		(2,~~427~~966,~~110~~637	)		-2219.54	%		1,~~711~~735,~~832~~347			-7058.5	%
Provision for Income Taxes		(~~268~~463,000	)		-3.18	%		(~~770~~841,000	)		-75.15	%		~~502~~378,000			-6544.29	%
Net Loss	$	(~~447~~768,~~278~~290	)		-56.12	%	$	(12,~~657~~125,~~110~~637	)		-1513.49	%	$	1,~~209~~357,~~832~~347			-7363.09	%

Net sales for the First Nine Months 2010 were $12,324,181, compared to $15,276,398 for the same period in the previous year, a 19.3% decrease. Sales to the Company’s recreational vehicle customers increased 53.4% in the First Nine Months 2010 when compared to the same period of the prior year. This increase is net of the discontinued sewn products for the RV industry. The recreational vehicle industry reported an 59.8% increase in shipments during the first nine months of 2010 compared to the same period of the prior year. Sales to the Company’s manufactured housing customers decreased 11.1% in the First Nine Months 2010 when compared to the same period of the prior year. The manufactured housing industry showed an 5.6% increase in shipments during the First Nine Months 2010 compared to the same period of the prior year. Sales to the Company’s hospitality customers decreased 37.9% in the First Nine Months 2010 when compared to the same period of the prior year. The decline in hospitality sales is a result of lower levels of activity for both new construction and refurbishment of hospitality existing properties.

~~Net~~Cost ~~sales~~of ~~for~~products ~~the~~sold ~~First~~decreased ~~Six Months 2010 were $8,719,654, compared~~ to ~~$10,783,033 for the same period in the previous year, a 19~~78.~~1% decrease. Sales to the Company’s recreational vehicle customers increased 75.~~4% ~~in the First Six Months 2010 when compared to the same period~~ of ~~the prior year. This increase is~~ net ofsales ~~the discontinued sewn products for the RV industry. The recreational vehicle industry reported an 87.1% increase~~ in ~~shipments during~~ the ~~first half of 2010 compared to the same period of the prior year. Sales to the Company’s manufactured housing customers decreased 8.8% in the~~ First ~~Six~~Nine Months 2010 ~~when~~ compared to ~~the same period of the prior year~~80. ~~The manufactured housing industry showed an 8.2~~9% ~~increase~~of innet ~~shipments~~sales ~~during~~a ~~the~~year ~~First~~ago, ~~Six~~due ~~Months 2010 compared~~ to ~~the~~improved ~~same~~labor ~~period~~efficiencies, ofreduced ~~the~~overhead, ~~prior~~and ~~year. Sales to the Company’s hospitality customers decreased 39.1%~~ in the ~~First Six Months 2010 when compared to the same period of the~~ prior year~~. The~~, ~~decline~~higher ininventory ~~hospitality~~obsolescence ~~sales~~charges isresulting afrom ~~result~~bankruptcies offiled ~~lower~~by ~~levels~~Fleetwood ofEnterprises ~~activity for both new construction~~ and ~~refurbishment~~Monaco ~~of hospitality properties~~Coach.

Cost of products sold decreased to 78.2% of net sales in the First Six Months 2010 compared to 81.9% of net sales a year ago, due to improved labor efficiencies, reduced overhead, and in the prior year, higher inventory obsolescence charges resulting from bankruptcies filed by Fleetwood Enterprises and Monaco Coach.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Selling and administrative expenses were $23,~~531~~766,~~466~~027 in the First ~~Six~~Nine Months 2010 versus $45,~~319~~793,~~641~~628 in the First ~~Six~~Nine Months 2009. The expenses for the First ~~Six~~Nine Months 2009 included charges of $900,000 related to the write-off of impaired assets and the closing of underperforming facilities. Excluding the write-offs, selling and administrative expenses were $~~888~~1,~~175~~127,601 less in 2010 than in 2009. The decrease ~~came~~was ~~from~~attributable to reductions in employees, compensation, benefits, commissions, and bad debt. The percentage of selling and administrative expenses to net sales decreased from 4037.19% for the First ~~Six~~Nine Months 2009 to 2930.06% for the First ~~Six~~Nine Months 2010.

Net loss was $~~447~~768,~~278~~290 for the First ~~Six~~Nine Months of 2010, compared to a net loss of $12,~~657~~125,~~110~~637 for the First ~~Six~~Nine Months of 2009. The reduction in the net loss was mostly attributable to the plant closing costs of $900,000 (pre-tax) recognized in 2009, but also to improved margins and reduced selling and administrative costs. The improvement was achieved despite a 19% reduction in net sales.

EBITDA

EBITDA represents income before income taxes, interest expense, depreciation and amortization and is an approximation of cash flow from operations before tax. The Company uses EBITDA as an internal measure of performance and believes it is a useful and commonly used measure of financial performance in addition to income before taxes and other profitability measures under U.S. Generally Accepted Accounting Principles (“GAAP”).

EBITDA is not a measure of performance under GAAP. EBITDA should not be construed as an alternative to operating income and income before taxes as an indicator of the Company’s operations in accordance with GAAP. Nor is EBITDA an alternative to cash flow from operating activities in accordance with GAAP. The Company’s definition of EBITDA can differ from that of other companies.

The following table reconciles Net Income, the most comparable measure under GAAP, to EBITDA for the thirteen and ~~twenty~~thirty-~~six~~nine week periods ended ~~July~~October 32, 2010 and ~~July~~October 43, 2009:

For the Thirteen Weeks Ended

For the ~~Twenty~~Thirty-~~Six~~Nine Weeks Ended

July 3, 2010

July 4, 2009

July 3, 2010

July 4, 2009

October 2, 2010

October 3, 2009

October 2, 2010

October 3, 2009

Net Loss

(~~103~~321,~~757~~012

)

(~~366~~468,~~181~~527

)

(~~447~~768,~~278~~290

)

(12,~~657~~125,~~110~~637

)

Add:

Interest

4443,~~784~~950

3234,~~787~~623

98142,~~516~~466

69103,~~152~~775

Taxes

(60195,000

)

(~~258~~71,000

)

(~~268~~463,000

)

(~~770~~841,000

)

Depreciation & Amortization

8184,~~492~~464

~~114~~102,~~869~~089

~~164~~248,~~085~~549

~~261~~363,~~832~~921

Loss/(Gain) on Disposal of Assets

(~~34,002~~881

)

95(10,~~145~~152

)

(1920,~~186~~067

)

8877,~~128~~976

Noncash charge for Asset Impairment

~~30,000~~-

365,500

EBITDA

(71388,~~483~~479

)

(~~351~~412,~~380~~967

)

(~~471~~860,~~863~~342

)

(12,~~642~~055,~~498~~465

)

ITEM 4. CONTROLS AND ~~PROCEDURES.~~ PREOCEDURES

(a) The Company’s principal executive officer and principal financial officer have reviewed the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of ~~July~~October 32, 2010 and have concluded that ~~they~~the Company’s disclosure controls and procedures were adequate and effective, based on the evaluation of such disclosure controls and procedures required by paragraph (b) of Rules 13a-15 and 15d-15.

(b) During the last fiscal quarter, there was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1A. RISK FACTORS

The Company is providing the following risk factors although, as a Smaller Reporting Company, the company is not required to provide risk factors. Additional risks are noted in the first paragraph of Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The following risk factors should not be considered an all-inclusive list of the risks applicable to the Company and/or its Common Stock.

1. Lack of Active Trading Market for the Common Stock. As a cost-saving measure, the Company is in the process of delisting the Common Stock from the NYSE Amex and deregistering it from the Securities Exchange Act of 1934. If we are able to complete the delisting and deregistration, the stock may be listed only on the “pink sheets” and the Company will no longer be filing financial or other reports with the Securities and Exchange Commission, or complying with its proxy rules. Consequently, it is likely that the number of potential purchasers of the stock will be significantly reduced, as will the number of brokers who trade the stock. We expect that these conditions will adversely affect the liquidity and possibly the market price of the stock.

2. Declining Sales. Company net sales have declined over the years from $46 million in fiscal 2007 to $39.6 million in fiscal 2008 and $18.6 million in fiscal 2009. Net sales for the first three fiscal quarters of this year declined to $12.3 million in fiscal 2010 from $15.3 million in fiscal 2009. These declines are primarily the result of downturns in the markets we serve and the fact that two of our largest customers have filed in bankruptcy. While there are signs of improvement in these markets, particularly in the market for recreational vehicles, or at least stabilization, there can be no assurance that our future sales will increase to the level necessary for the Company to operate at a profit.

3. Operating Losses. Commensurate with the declining sales, the Company has experienced significant operating losses over the past four years which continued into fiscal 2010. The net losses for fiscal 2007, 2008 and 2009 were $807,509, $2,585,487 and $3,037,560, respectively, and the net loss for the first three fiscal quarters of 2010 was $768,290. These losses were the result of the declining sales and overhead expenses which could not be reduced as quickly as the sales decline. While there are indications that sales may improve in the future, and the Company has taken steps to reduce expenses, there is no assurance that the Company will operate at a profit in the future. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

ITEM 6. EXHIBITS

~~31.1 - Certification~~The offollowing ~~Principal~~exhibits ~~Executive~~are ~~Officer~~filed herewith:

~~31.2 - Certification~~10AA Revolving Promissory Note dated May 24, 2006, and Term Promissory Note of ~~Principal~~same ~~Financial~~date, ~~Officer~~and related Loan Agreement with Wachovia Bank (now, Wells Fargo Bank) of same date.

~~32 - Certificate~~10AA.3 ~~required~~Modification byAgreement 18with ~~U.S.C.~~Wachovia ~~§1350~~Bank (now, Wells Fargo Bank) dated September 30, 2009.

1231.1 Certification of Principal Executive Officer.

31.2

Certification of Principal Financial Officer.

Certificate required by 18 U.S.C. §1350.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DECORATOR INDUSTRIES, INC. (Registrant)
	DECORATOR INDUSTRIES, INC.
Date: August 17 , 2010	By:	/s/ William A. Johnson
	(Registrant)
		William A. Johnson, President and Chief Executive Officer
Date: December 10, 2010	By:	/s/ William A. Johnson
Date: August 17, 2010	By:	/s/ Michael K. Solomon
	William A. Johnson, President and Chief Executive Officer
		Michael K. Solomon, Chief Financial Officer
Date: December 10, 2010	By:	/s/ Michael K. Solomon
	Michael K. Solomon, Chief Financial Officer

1312

Filing Compare · DECORATOR INDUSTRIES INC