UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended October 3, 2009



OR



[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934



Commission file number 1-7753



DECORATOR INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)



|                                                       |  |                     | 
|------------------------------------------------------ |  | ------------------- | 
|Pennsylvania                                           |  | 25-1001433         
|(State or other jurisdiction of                        |  | (I.R.S. Employer   
|incorporation or organization)                         |  | Identification No.)
|                                                       |  |                    
|10011 Pines Blvd., Suite #201, Pembroke Pines, Florida |  | 33024              
|(Address of principal executive offices)               |  | (Zip Code)         



Registrant's telephone number, including area code:

(954) 436-8909



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  [X].            No  [  ]



Indicate by check mark whether the registrant is 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 [  ]

Accelerated filer  [  ]



Non-accelerated filer   [  ]

Smaller reporting company   [X]



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  [  ].            No  [X]



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





Title of each class

Outstanding at November 17, 2009

Common Stock, Par Value $.20 Per Share

3,043,614 shares













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PART I  FINANCIAL INFORMATION

Item 1.   Financial Statements.

|                                                                                                  |  |   |             |  |   |            | 
|------------------------------------------------------------------------------------------------- |  | - | ----------- |  | - | ---------- | 
|DECORATOR INDUSTRIES, INC                                                                        
|BALANCE SHEETS                                                                                   
|                                                                                                  |  |   |             |  |   |            | 
|ASSETS                                                                                            |  |   | October 3,  |  |   | January 3, | 
|                                                                                                  |  |   | 2009        |  |   | 2009       | 
|                                                                                                  |  |   | (UNAUDITED) |  |   |            | 
|                                                                                                  |  |   |             |  |   |            | 
|                                                                                                  |  |   |             |  |   |            | 
|Current Assets:                                                                                   |  |   |             |  |   |            | 
|Cash and Cash Equivalents                                                                         |  | $ | 112,010     |  | $ | 16,499     | 
|Accounts Receivable, less allowance for
doubtful accounts ($261,735 and $446,421)                 |  |   | 2,104,868   |  |   | 2,214,256  | 
|Inventories                                                                                       |  |   | 2,035,993   |  |   | 3,783,581  | 
|Other Current Assets                                                                              |  |   | 505,836     |  |   | 524,879    | 
|Total Current Assets                                                                              |  |   | 4,758,707   |  |   | 6,539,215  | 
|                                                                                                  |  |   |             |  |   |            | 
|Property and Equipment                                                                            |  |   |             |  |   |            | 
|Land, Buildings & Improvements                                                                    |  |   | 2,872,422   |  |   | 4,805,667  | 
|Machinery, Equipment, Furniture & Fixtures and Software                                           |  |   | 7,317,704   |  |   | 7,750,046  | 
|Total Property and Equipment                                                                      |  |   | 10,190,126  |  |   | 12,555,713 | 
|Less: Accumulated Depreciation and Amortization                                                   |  |   | 7,016,655   |  |   | 7,355,020  | 
|Active Assets, Net                                                                                |  |   | 3,173,471   |  |   | 5,200,693  | 
|Property Held for Sale, Net                                                                       |  |   | 3,357,565   |  |   | 3,369,374  | 
|Net Property and Equipment                                                                        |  |   | 6,531,036   |  |   | 8,570,067  | 
|                                                                                                  |  |   |             |  |   |            | 
|Goodwill, less accumulated Amortization of $1,348,569                                             |  |   | 3,841,710   |  |   | 3,799,300  | 
|Deferred Income taxes                                                                             |  |   | 1,900,000   |  |   | 876,000    | 
|Other Assets                                                                                      |  |   | 324,605     |  |   | 362,227    | 
|                                                                                                  |  |   |             |  |   |            | 
|Total Assets                                                                                      |  | $ | 17,356,058  |  | $ | 20,146,809 | 
|                                                                                                  |  |   |             |  |   |            | 
|LIABILITIES & STOCKHOLDERS' EQUITY                                                                |  |   |             |  |   |            | 
|                                                                                                  |  |   |             |  |   |            | 
|Current Liabilities:                                                                              |  |   |             |  |   |            | 
|Accounts Payable                                                                                  |  | $ | 633,473     |  | $ | 830,153    | 
|Current Maturities of Long-term Debt                                                              |  |   | 3,114,400   |  |   | 2,684,000  | 
|Checks Issued But Not Yet Presented                                                               |  |   | 339,644     |  |   | 321,703    | 
|Accrued Expenses:                                                                                 |  |   |             |  |   |            | 
|Compensation                                                                                      |  |   | 239,659     |  |   | 420,583    | 
|Other                                                                                             |  |   | 1,149,438   |  |   | 1,875,677  | 
|Total Current Liabilities                                                                         |  |   | 5,476,614   |  |   | 6,132,116  | 
|                                                                                                  |  |   |             |  |   |            | 
|Long-Term Debt                                                                                    |  |   | 525,000     |  |   | 615,000    | 
|Total Liabilities                                                                                 |  |   | 6,001,614   |  |   | 6,747,116  | 
|                                                                                                  |  |   |             |  |   |            | 
|Stockholders' Equity                                                                              |  |   |             |  |   |            | 
|Common Stock $.20 par value: Authorized shares, 10,000,000; ssued shares, 4,757,458 and 4,658,729 |  |   | 951,492     |  |   | 931,746    | 
|Paid-in Capital                                                                                   |  |   | 2,072,029   |  |   | 2,011,386  | 
|Retained Earnings                                                                                 |  |   | 16,643,846  |  |   | 18,769,484 | 
|                                                                                                  |  |   | 19,667,367  |  |   | 21,712,616 | 
|Less: Treasury stock, at cost: 1,713,844 shares                                                   |  |   | 8,312,923   |  |   | 8,312,923  | 
|Total Stockholders' Equity                                                                        |  |   | 11,354,444  |  |   | 13,399,693 | 
|Total Liabilities and Stockholders' Equity                                                        |  | $ | 17,356,058  |  | $ | 20,146,809 | 





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



1



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|                           |                                               |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        |  | 
|-------------------------- | --------------------------------------------- | ---------------------------- | ------ | ------------------------------- | --------- | ----------------- | ----- | ------------------ | ----------- | ----------------- | ------ | ------ | ----------- | ----------------- | ----- | ------ |  | 
|DECORATOR INDUSTRIES, INC  |                                              
|STATEMENTS OF EARNINGS     |                                              
|(UNAUDITED)                |                                              
|                           |                                               |                              |        |                                 |           |                   |       |                    |             |                   |       
|                           |                                               | For the Thirteen Weeks Ended |        | For the Thirty-Nine Weeks Ended |          
|                           |                                               | October 3, 2009              |        | September 27, 2008              |           | October 3, 2009   |       | September 27, 2008 |            
|                           |                                               |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        | 
|Net Sales                  |                                               | $   4,493,365                |        | 100.0%                          |           | $  9,334,653      |       | 100.0%             |             | $ 15,276,398      |        | 100.0% |             | $ 32,401,620      |       | 100.0% | 
|Cost of Products Sold      |                                               | 3,531,984                    |        | 78.6%                           |           | 7,785,917         |       | 83.4%              |             | 12,365,268        |        | 80.9%  |             | 27,159,748        |       | 83.8%  | 
|Gross Profit               |                                               | 961,381                      |        | 21.4%                           |           | 1,548,736         |       | 16.6%              |             | 2,911,130         |        | 19.1%  |             | 5,241,872         |       | 16.2%  | 
|                           |                                               |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        | 
|                           | Selling and Administrative Expenses           | 1,473,987                    |        | 32.8%                           |           | 2,184,202         |       | 23.4%              |             | 5,793,628         |        | 37.9%  |             | 8,344,805         |       | 25.8%  | 
|Operating Loss             | (512,606)                                     |                              | -11.4% |                                 | (635,466) |                   | -6.8% |                    | (2,882,498) |                   | -18.8% |        | (3,102,933) |                   | -9.6% |       
|                           |                                               |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        | 
|                           | Other Income (Expense)                        |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        |  | 
|Interest, Investment and   |                                               |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        | 
|Other Income               |                                               | 7,702                        |        | 0.2%                            |           | 12,504            |       | 0.1%               |             | 19,636            |        | 0.1%   |             | 47,114            |       | 0.1%   | 
|Interest Expense           |                                               | (34,623)                     |        | -0.8%                           |           | (36,328)          |       | -0.4%              |             | (103,775)         |        | -0.7%  |             | (99,518)          |       | -0.2%  | 
|Loss Before Income Taxes   |                                               | (539,527)                    |        | -12.0%                          |           | (659,290)         |       | -7.1%              |             | (2,966,637)       |        | -19.4% |             | (3,155,337)       |       | -9.7%  | 
|Provision for Income Taxes |                                               | (71,000)                     |        | -1.6%                           |           | (252,000)         |       | -2.7%              |             | (841,000)         |        | -5.5%  |             | (1,212,000)       |       | -3.7%  | 
|                           |                                               |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        | 
|Net Loss                   |                                               | $    (468,527)               |        | -10.4%                          |           | $    (407,290)    |       | -4.4%              |             | $ (2,125,637)     |        | -13.9% |             | $ (1,943,337)     |       | -6.0%  | 
|                           |                                               |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        | 
|                           |                                               |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        | 
|                           | EARNINGS PER SHARE                            |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        |  | 
|Basic                      |                                               | $          (0.16)            |        |                                 |           | $          (0.14) |       |                    |             | $          (0.71) |        |        |             | $          (0.66) |       |        | 
|                           |                                               |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        | 
|Diluted                    |                                               | $          (0.16)            |        |                                 |           | $          (0.14) |       |                    |             | $          (0.71) |        |        |             | $          (0.66) |       |        | 
|                           |                                               |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        | 
|                           | Weighted Average Number of Shares Outstanding |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |       
|Basic                      |                                               | 3,022,493                    |        |                                 |           | 2,933,683         |       |                    |             | 2,987,849         |        |        |             | 2,932,846         |       |        | 
|Diluted                    |                                               | 3,022,493                    |        |                                 |           | 2,933,683         |       |                    |             | 2,987,849         |        |        |             | 2,932,846         |       |        | 
|                           |                                               |                              |        |                                 |           |                   |       |                    |             |                   |        |        |             |                   |       |        | 





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



2





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|                                                    |  |                                 |                 |  |   |                    | 
|--------------------------------------------------- |  | ------------------------------- | --------------- |  | - | ------------------ | 
|DECORATOR INDUSTRIES, INC                          
|STATEMENTS OF CASH FLOWS                           
|(UNAUDITED)                                        
|                                                    |  |                                 |                 |  |   |                    | 
|                                                    |  | For the Thirty-Nine Weeks Ended |                
|                                                    |  |                                 | October 3, 2009 |  |   | September 27, 2008 | 
|                                                    |  |                                 |                 |  |   |                    | 
|Cash Flows From Operating Activities:               |  |                                 |                 |  |   |                    | 
|Net Loss                                            |  | $                               | (2,125,637)     |  | $ | (1,943,337)        | 
|Adjustments to Reconcile Net Loss to Net Cash       |  |                                 |                 |  |   |                    | 
|Used in Operating Activities                        |  |                                 |                 |  |   |                    | 
|Depreciation and Amortization                       |  |                                 | 363,921         |  |   | 900,742            | 
|Provision for Losses on Accounts Receivable         |  |                                 | 72,651          |  |   | 177,647            | 
|Deferred Taxes                                      |  |                                 | (841,000)       |  |   | (614,000)          | 
|Stock-Based Compensation                            |  |                                 | 15,280          |  |   | 30,561             | 
|Loss/(Gain) on Disposal of Assets                   |  |                                 | 77,976          |  |   | (3,301)            | 
|Noncash charges for asset impairment                |  |                                 | 365,500         |  |   | 1,270,077          | 
|Increase/(Decrease) from Changes in:                |  |                                 |                 |  |   |                    | 
|Accounts Receivable                                 |  |                                 | 36,737          |  |   | (995,090)          | 
|Inventories                                         |  |                                 | 1,747,588       |  |   | 394,697            | 
|Prepaid Expenses                                    |  |                                 | (204,211)       |  |   | 447,765            | 
|Other Assets                                        |  |                                 | (73,545)        |  |   | (744,520)          | 
|Accounts Payable                                    |  |                                 | (196,680)       |  |   | (206,990)          | 
|Accrued Expenses                                    |  |                                 | (898,190)       |  |   | 280,558            | 
|Net Cash Used in Operating Activities               |  |                                 | (1,659,610)     |  |   | (1,005,191)        | 
|                                                    |  |                                 |                 |  |   |                    | 
|Cash Flows From Investing Activities:               |  |                                 |                 |  |   |                    | 
|Net cash paid for acquisitions                      |  |                                 | (21,410)        |  |   | (12,448)           | 
|Capital Expenditures                                |  |                                 | (109,144)       |  |   | (181,171)          | 
|Proceeds from Property Dispositions                 |  |                                 | 1,462,225       |  |   | 4,400              | 
|Net Cash Provided by/(Used in) Investing Activities |  |                                 | 1,331,671       |  |   | (189,219)          | 
|                                                    |  |                                 |                 |  |   |                    | 
|Cash Flows From Financing Activities:               |  |                                 |                 |  |   |                    | 
|Long-term Debt Payments                             |  |                                 | (90,000)        |  |   | (556,944)          | 
|Dividend Payments                                   |  |                                 | ----            |  |   | (175,495)          | 
|Change in Checks Issued but Not Yet Presented       |  |                                 | 17,941          |  |   | 302,328            | 
|Net Borrowings under Line-of-Credit Agreement       |  |                                 | 430,400         |  |   | 1,962,000          | 
|Issuance of Stock for Directors Trust               |  |                                 | 65,109          |  |   | 64,750             | 
|Purchase of Common Stock for Treasury               |  |                                 | ----            |  |   | (386,002)          | 
|Net Cash Provided by Financing Activities           |  |                                 | 423,450         |  |   | 1,210,637          | 
|                                                    |  |                                 |                 |  |   |                    | 
|Net Increase in Cash and Cash Equivalents           |  |                                 | 95,511          |  |   | 16,227             | 
|Cash and Cash Equivalents at Beginning of Year      |  |                                 | 16,499          |  |   | 17,544             | 
|                                                    |  |                                 |                 |  |   |                    | 
|Cash and Cash Equivalents at End of Period          |  | $                               | 112,010         |  | $ | 33,771             | 
|                                                    |  |                                 |                 |  |   |                    | 
|Supplemental Disclosures of Cash Flow Information:  |  |                                 |                 |  |   |                    | 
|Cash Paid for:                                      |  |                                 |                 |  |   |                    | 
|Interest                                            |  | $                               | 100,991         |  | $ | 91,235             | 
|Income Taxes                                        |  | $                               | -               |  | $ | 6,403              | 
|                                                    |  |                                 |                 |  |   |                    | 
|Increase in Acquisition Cost/Goodwill               |  | $                               | 42,410          |  | $ | 153,924            | 
|Working Capital, other than Cash                    |  |                                 | (21,000)        |  |   | (141,476)          | 
|Net Cash Paid for Acquisition/Goodwill              |  | $                               | 21,410          |  | $ | 12,448             | 





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



3





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DECORATOR INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

THIRTY-NINE WEEKS ENDED OCTOBER  3, 2009 AND SEPTEMBER 27, 2008

(UNAUDITED)



NOTE 1.

In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly the Companys financial position as of October 3, 2009, the changes therein for the thirty-nine week period then ended and the results of operations for the thirty-nine week periods ended October 3, 2009 and September 27, 2008.



NOTE 2.

The financial statements included in the Form 10-Q are presented in accordance with the requirements of the Form and do not include all of the disclosures required by accounting principles generally accepted in the United States of America.  For additional information, reference is made to the Companys annual report on Form 10-K for the year ended January 3, 2009. The results of operations for the thirty-nine week periods ended October 3, 2009 and September 27, 2008 are not necessarily indicative of operating results for the full year.



NOTE 3.

INVENTORIES



Inventories at October 3, 2009 and January 3, 2009 consisted of the following:



|                              |  |                 |           |                 |   |          
|----------------------------- |  | --------------- | --------- | --------------- | - | ---------
|                              |  |                 |           |                 |   |          
|                              |  | October 3, 2009 |           | January 3, 2009
|Raw Material and Supplies     |  | $               | 1,597,623 |                 | $ | 3,166,886
|In Process and Finished Goods |  |                 | 438,370   |                 |   | 616,695  
|Total Inventory               |  | $               | 2,035,993 |                 | $ | 3,783,581
|                              |  |                 |           |                 |   |          



NOTE 4.

EARNINGS PER SHARE



Basic earnings per share is computed by dividing net income by weighted-average number of shares outstanding.  Diluted earnings per share includes the dilutive effect of stock options.  No dilution is shown for all periods since the effect of the stock options on the net loss is antidilutive.  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 3, 2009              |           | September 27, 2008              |   | October 3, 2009 |  | September 27, 2008
|Numerator:                                           |  |                              |           |                                 |   |                 |  |                    |             |  |   |            
|Net loss                                             |  | $                            | (468,527) |                                 | $ | (407,290)       |  | $                  | (2,125,637) |  | $ | (1,943,337)
|Denominator:                                         |  |                              |           |                                 |   |                 |  |                    |             |  |   |            
|Weighted-average number of
common shares outstanding |  |                              | 3,022,493 |                                 |   | 2,933,683       |  |                    | 2,987,849   |  |   | 2,932,846  
|                                                     |  |                              |           |                                 |   |                 |  |                    |             |  |   |            
|Dilutive effect of
stock options on net income       |  |                              | 0         |                                 |   | 0               |  |                    | 0           |  |   | 0          
|                                                     |  |                              |           |                                 |   |                 |  |                    |             |  |   |            
|                                                     |  |                              | 3,022,493 |                                 |   | 2,933,683       |  |                    | 2,987,849   |  |   | 2,932,846  
|                                                     |  |                              |           |                                 |   |                 |  |                    |             |  |   |            
|Diluted earnings per share:                          |  | $                            | (0.16)    |                                 | $ | (0.14)          |  | $                  | (0.71)      |  | $ | (0.66)     





4



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NOTE 5.

ASSET SALE



On May 1, 2009 and May 7, 2009, respectively, the Company entered into Sale/Leaseback transactions for its Abbotsford, WI and Bossier City, LA facilities.



The net proceeds from these sales were $1,438,000 and were used to pay down the line-of-credit with Wachovia Bank.  The Company recognized a loss on the building sales of $97,714 in the second quarter of 2009.



The leases that the Company entered into for these facilities were each for 15 year terms and will have a total annual rent in the first year of $158,000.  Each lease has an annual increase of two percent and the Company is responsible for all maintenance and the payment of property taxes.







Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations.



Cautionary Statement: This Quarterly Report on Form 10-Q may contain statements relating to future events, including results of operations, that are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent the Company's expectations or belief as to future events and, by their very nature, are subject to risks and uncertainties which may result in actual events differing materially from those anticipated. In particular, future operating results and future liquidity will be affected by the level of demand for recreational vehicles, manufactured housing and hotel/motel accommodations and may be affected by changes in general economic conditions, interest rate fluctuations, the Companys ability to retain or replace its line-of-credit availability, the availability of consumer credit, the availability of floor-plan credit for recreational vehicle and manufactured housing retail dealers, the 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. 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.





|                             |                 |  |                
|---------------------------- | --------------- |  | ---------------
|                             | October 3, 2009 |  | January 3, 2009
|Current Ratio                | 0.87:1          |  | 1.07:1         
|Quick Ratio                  | 0.50:1          |  | 0.45:1         
|Funded Debt to Total Capital | 24.3%           |  | 19.8%          
|Working Capital              | $(717,907)      |  | $407,099       



















5



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Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)

In September 2009, The Company modified its loan agreement with Wachovia Bank. The Modification Agreement extends the maturity date of the Loan Agreement to December 31, 2010,  changes the interest rate to Prime Rate plus two percent and limits the outstanding balance to the lesser of $4 million or seventy-five percent of  the appraised value of six of the Companys properties which  were  previously unencumbered. Decorator expects the real estate appraisals to fully support the $4 million of availability.

Wachovia Bank will secure repayment of the loan by collateralizing this real estate. Should any of this real estate be sold, the net proceeds will pay down the Loan and reduce the available loan limit dollar for dollar.

In addition, the Loan Modification allows Decorator to establish an additional credit line with an asset-based lender using all of Decorators accounts receivable and inventory as collateral. This should provide as much as $2 million of additional working capital availability. Should the appraisal value of the real estate be less than expected, then the initial proceeds of the asset-based loan will be used to pay down the Wachovia balance so that the balance equals 75% of appraised value of the real estate.

At October 3, 2009 the balance on the line of credit was $2,994,400 and $2,564,000 on January 3, 2009.

Because of the recent change to the tax-loss carry back rule, the Company will be able to claim a refund of approximately $1,200,000 after it files its 2009 tax return. It is expected that this refund should be received by mid-year 2010 and will improve working capital at that time.

Days Sales Outstanding (DSO) in accounts receivable were 41.3 days at October 3, 2009 compared to 29.8 days and 40.6 days at January 3, 2009 and September 27, 2008, respectively.  The increase is attributable to longer collection times in addition to a greater percentage of the Companys sales to the hospitality market, which traditionally has had longer collection times.  Net accounts receivable was $2,104,868 at October 3, 2009, compared to $2,214,256 and $4,241,115 at January 3, 2009 and September 27, 2008, respectively.   The decrease in accounts receivable compared to September 27, 2008 is due to the reduced sales volumes in the current year.  Inventories were $2,035,993 at October 3, 2009, as compared to $3,783,581 and $4,786,948 at January 3, 2009 and September 27, 2008, respectively.   The inventory declines are due to inventory writedowns related to RV customer bankruptcies, the decision to discontinue the manufacturing of sewn products for the RV industry and lower sales volume.

Capital expenditures were $109,144 for the first nine months of 2009, compared to $181,171 for the same period of the prior year.

SALES BY MARKET

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

|                       |  |                              |  |                                 |  |                 |  |                    |  |             |  |       |  |           |  |      
|---------------------- |  | ---------------------------- |  | ------------------------------- |  | --------------- |  | ------------------ |  | ----------- |  | ----- |  | --------- |  | -----
|(dollars in thousands) |  |                              |  |                                 |  |                 |  |                    |  |             |  |       |  |           |  |      
|                       |  | For the Thirteen Weeks Ended |  | For the Thirty-Nine Weeks Ended
|                       |  | October 3, 2009              |  | September 27, 2008              |  | October 3, 2009 |  | September 27, 2008
|                       |  | Net                          |  | % of                            |  | Net             |  | % of               |  | Net         |  | % of  |  | Net       |  | % of 
|                       |  | Sales                        |  | total                           |  | Sales           |  | total              |  | Sales       |  | total |  | Sales     |  | total
|Recreational Vehicle   |  | $     1,025                  |  | 23%                             |  | $    2,347      |  | 25%                |  | $     2,942 |  | 19%   |  | $  11,670 |  | 36%  
|Manufactured Housing   |  | 1,299                        |  | 29%                             |  | 2,106           |  | 23%                |  | 3,968       |  | 26%   |  | 7,068     |  | 22%  
|Hospitality            |  | 2,169                        |  | 48%                             |  | 4,882           |  | 52%                |  | 8,366       |  | 55%   |  | 13,664    |  | 42%  
|                       |  |                              |  |                                 |  |                 |  |                    |  |             |  |       |  |           |  |      
|Total Net Sales        |  | $     4,493                  |  | 100%                            |  | $    9,335      |  | 100%               |  | $   15,276  |  | 100%  |  | $  32,402 |  | 100% 
|                       |  |                              |  |                                 |  |                 |  |                    |  |             |  |       |  |           |  |      





6



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Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)





RESULTS OF OPERATIONS



Thirteen Week Period Ended October 3, 2009, (Third Quarter 2009) compared to

Thirteen Week Period Ended September 27, 2008, (Third Quarter 2008)



The following table shows a comparison of the results of operations between Third Quarter 2009 and Third Quarter 2008:



|                                    |  |               |           |          |        |               |   |           |  |            |  |          |             |  |        | 
|----------------------------------- |  | ------------- | --------- | -------- | ------ | ------------- | - | --------- |  | ---------- |  | -------- | ----------- |  | ------ | 
|                                    |  | Third Quarter |           | %        |        | Third Quarter |   | %         |  | $ Increase |  |          |            
|                                    |  | 2009          |           | of Sales |        | 2008          |   | of Sales  |  | (Decrease) |  | % Change |            
|                                    |  |               |           |          |        |               |   |           |  |            |  |          |             |  |        | 
|Net Sales                           |  | $             | 4,493,365 |          | 100%   |               | $ | 9,334,653 |  | 100%       |  | $        | (4,841,288) |  | -51.9% | 
|Cost of Products Sold               |  |               | 3,531,984 |          | 78.6%  |               |   | 7,785,917 |  | 83.4%      |  |          | (4,253,933) |  | -54.6% | 
|Gross Profit                        |  |               | 961,381   |          | 21.4%  |               |   | 1,548,736 |  | 16.6%      |  |          | (587,355)   |  | -37.9% | 
|                                    |  |               |           |          |        |               |   |           |  |            |  |          |             |  |        | 
|Selling and Administrative Expenses |  |               | 1,473,987 |          | 32.8%  |               |   | 2,184,202 |  | 23.4%      |  |          | (710,215)   |  | -32.5% | 
|Operating Loss                      |  |               | (512,606) |          | -11.4% |               |   | (635,466) |  | -6.8%      |  |          | 122,860     |  | -19.3% | 
|                                    |  |               |           |          |        |               |   |           |  |            |  |          |             |  |        | 
|Other Income/(Expense)              |  |               |           |          |        |               |   |           |  |            |  |          |             |  |        | 
|Interest, Investment and            |  |               |           |          |        |               |   |           |  |            |  |          |             |  |        | 
|Other Income                        |  |               | 7,702     |          | 0.2%   |               |   | 12,504    |  | 0.1%       |  |          | (4,802)     |  | -38.4% | 
|Interest Expense                    |  |               | (34,623)  |          | -0.8%  |               |   | (36,328)  |  | -0.4%      |  |          | 1,705       |  | -4.7%  | 
|Loss Before Income Taxes            |  |               | (539,527) |          | -12.0% |               |   | (659,290) |  | -7.1%      |  |          | 119,763     |  | -18.2% | 
|Provision for Income Taxes          |  |               | (71,000)  |          | -1.6%  |               |   | (252,000) |  | -2.7%      |  |          | 181,000     |  | -71.8% | 
|                                    |  |               |           |          |        |               |   |           |  |            |  |          |             |  |        | 
|Net Loss                            |  | $             | (468,527) |          | -10.4% |               | $ | (407,290) |  | -4.4%      |  | $        | (61,237)    |  | 15.0%  | 





Net sales for the Third Quarter 2009 were $4,493,365, compared to $9,334,653 for the same period in the previous year, a 51.9% decrease.  Sales to the Companys recreational vehicle customers decreased 56.3% in Third Quarter 2009 when compared to the same period of the prior year.  The recreational vehicle industry reported a 1.4% decrease in shipments during the Third Quarter 2009 compared to the same period of the prior year.  The Companys sales to the RV industry were adversely impacted because two of the Companys major RV customers (Fleetwood Enterprises and Monaco Coach Corp.) filed bankruptcy petitions during the first week of March 2009.  Also, the Companys decision to discontinue the manufacture of sewn goods for the RV industry impacted the 2009 sales to the RV industry.  Sales to the Companys manufactured housing customers decreased 38.3% in Third Quarter 2009 when compared to the same period of the prior year.  The manufactured housing industry showed a 36.9% decrease in shipments during the Third Quarter 2009 compared to the same period of the prior year. Sales to the Companys hospitality customers decreased 55.6% in the Third Quarter 2009 when compared to the same period of the prior year.



Cost of products sold decreased to 78.6% of net sales in the Third quarter 2009 compared to 83.4% of net sales a year ago, due to improved labor efficiencies, reduced overhead and, in the prior year, higher inventory obsolescence charges.













7



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Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)





Selling and administrative expenses were $1,473,987 in the Third Quarter 2009 versus $2,184,202 in the Third Quarter 2008.  The percentage of selling and administrative expenses to net sales increased from 23.4% in 2008 to 32.8% in 2009.  The increase was due to fixed expenses being spread over a lower sales volume. Expenses in 2009 included $100,000 for loan modification costs. Without this charge, selling and administrative expenses would have been reduced by more than $800,000 compared to the Third Quarter 2008.



Net loss in the Third Quarter 2009 was $468,527 compared to a net loss of $407,290 in the Third Quarter 2008. The 2009 loss was negatively affected by the $100,000, pretax, loan modification charge and an effective tax rate of 13.2% in 2009 compared to 38.2% in 2008. Without the loan modification cost and a normal tax rate the 2009 loss would have been approximately $271,000 compared to a loss of $407,290 in 2008.





Thirty-nine Week Period Ended October 3, 2009, (First Nine Months 2009) compared to

Thirty-nine Week Period Ended September 27, 2008, (First Nine Months 2008)





The following table shows a comparison of the results of operations between First Nine Months 2009 and First Nine Months 2008:





|                                      |                        |  |          |  |               |  |          |  |                |  |          |  | 
|------------------------------------- | ---------------------- |  | -------- |  | ------------- |  | -------- |  | -------------- |  | -------- |  | 
|                                      | First                  |  |          |  | First         |  |          |  |                |  |          | 
|                                      | Nine Months            |  | %        |  | Nine Months   |  | %        |  | $ Increase     |  |          | 
|                                      | 2009                   |  | of Sales |  | 2008          |  | of Sales |  | (Decrease)     |  | % Change | 
|                                      |                        |  |          |  |               |  |          |  |                |  |          | 
|Net Sales                             | $ 15,276,398           |  | 100%     |  | $ 32,401,620  |  | 100%     |  | $(17,125,222)  |  | -52.9%   | 
|Cost of Products Sold                 | 12,365,268             |  | 80.9%    |  | 27,159,748    |  | 83.8%    |  | (14,794,480)   |  | -54.5%   | 
|Gross Profit                          | 2,911,130              |  | 19.1%    |  | 5,241,872     |  | 16.2%    |  | (2,330,742)    |  | -44.5%   | 
|                                      |                        |  |          |  |               |  |          |  |                |  |          | 
|Selling and Administrative
Expenses   | 5,793,628              |  | 37.9%    |  | 8,344,805     |  | 25.8%    |  | (2,551,177)    |  | -30.6%   | 
|Operating Loss                        | (2,882,498)            |  | -18.8%   |  | (3,102,933)   |  | -9.6%    |  | 220,435        |  | -7.1%    | 
|                                      |                        |  |          |  |               |  |          |  |                |  |          | 
|                                      | Other Income/(Expense) |  |          |  |               |  |          |  |                |  |          |  | 
|Interest, Investment and
Other Income | 19,636                 |  | 0.1%     |  | 47,114        |  | 0.2%     |  | (27,478)       |  | -58.3%   | 
|Interest Expense                      | (103,775)              |  | -0.7%    |  | (99,518)      |  | -0.3%    |  | (4,257)        |  | 4.3%     | 
|Loss Before Income Taxes              | (2,966,637)            |  | -19.4%   |  | (3,155,337)   |  | -9.7%    |  | 188,700        |  | -6.0%    | 
|Provision for Income Taxes            | (841,000)              |  | -5.5%    |  | (1,212,000)   |  | -3.7%    |  | 371,000        |  | -30.6%   | 
|                                      |                        |  |          |  |               |  |          |  |                |  |          | 
|Net Loss                              | $ (2,125,637)          |  | -13.9%   |  | $ (1,943,337) |  | -6.0%    |  | $    (182,300) |  | 9.4%     | 





8



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Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)



Net sales for the First Nine Months 2009 were $15,276,398, compared to $32,401,620 for the same period in the previous year, a 52.9% decrease.  Sales to the Companys recreational vehicle customers decreased 74.8% in the First Nine Months 2009 when compared to the same period of the prior year.  The recreational vehicle industry reported a 42.7% decrease in shipments during the first nine months of 2009 compared to the same period of the prior year.  The Companys sales to the RV industry decreased by more than the overall market because two of the Companys major RV customers (Fleetwood Enterprises and Monaco Coach Corp.) filed bankruptcy petitions during the first week of March 2009.  Also, the Companys decision to discontinue the manufacture of sewn goods for the RV industry impacted the 2009 sales to the RV industry.  Sales to the Companys manufactured housing customers decreased 43.9% in the First Nine Months 2009 when compared to the same period of the prior year.  The manufactured housing industry showed a 42.2% decrease in shipments during the First Nine Months 2009 compared to the same period of the prior year.  Sales to the Companys hospitality customers decreased 38.8% in the First Nine Months 2009 when compared to the same period of the prior year.



Cost of products sold decreased to 80.9% of net sales in the First Nine Months 2009 compared to 83.8% of net sales a year ago, due to reduced overhead, change in sales mix, improved labor efficiency and, in the prior year, higher inventory obsolescence charges.



Selling and administrative expenses were $5,793,628 in the First Nine months 2009 versus $8,344,805 in the First Nine Months 2008.  The expenses for the First Nine Months 2009 included a charge of $900,000 related to the write-off of impaired assets and the closing of the underperforming facilities, whereas the charge for the First Nine Months 2008 was $1,430,000. 2009 Expenses included $100,000 for the Loan Modification. Excluding the write-offs and the loan modification costs, selling and administrative expenses were $2,121,177 less in 2009 than in 2008.  The decrease came from reductions in employees, compensation, benefits, amortization of intangibles, commissions, and bad debt. The percentage of selling and administrative expenses to net sales increased from 25.8% for the First Nine Months 2008 to 37.9% for the First Nine Months 2009 as fixed expenses were spread over a lower sales volume.



Net loss for the First Nine Months of 2009 was $2,125,637 compared to $1,943,331 for the same period of 2008. The 2009 Net Loss was negatively affected by an effective tax rate of 28.3% compared to 38.4% in 2008. With a normal tax rate in 2009 the Net Loss for the First Nine Months would have been approximately $1,800,000.





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 thirty-nine week periods ended October 3, 2009 and September 27, 2008:





Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)



9



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|                                    |  |                              |                 |                                 |   |                    |  |   |                 |  |   |                    | 
|----------------------------------- |  | ---------------------------- | --------------- | ------------------------------- | - | ------------------ |  | - | --------------- |  | - | ------------------ | 
|                                    |  | For the Thirteen Weeks Ended |                 | For the Thirty-Nine Weeks Ended |  
|                                    |  |                              | October 3, 2009 |                                 |   | September 27, 2008 |  |   | October 3, 2009 |  |   | September 27, 2008 | 
|Net Loss                            |  | $                            | (468,527)       |                                 | $ | (407,290)          |  | $ | (2,125,637)     |  | $ | (1,943,337)        | 
|                                    |  |                              |                 |                                 |   |                    |  |   |                 |  |   |                    | 
|Add:                                |  |                              |                 |                                 |   |                    |  |   |                 |  |   |                    | 
|Interest                            |  |                              | 34,623          |                                 |   | 36,328             |  |   | 103,775         |  |   | 99,518             | 
|Taxes                               |  |                              | (71,000)        |                                 |   | (252,000)          |  |   | (841,000)       |  |   | (1,212,000)        | 
|Depreciation & Amortization         |  |                              | 102,089         |                                 |   | 187,501            |  |   | 363,921         |  |   | 900,742            | 
|Loss/(Gain) on Disposal of Assets   |  |                              | (10,152)        |                                 |   | 699                |  |   | 77,976          |  |   | (3,301)            | 
|Noncash charge for Asset
Impairment |  |                              | -               |                                 |   | -                  |  |   | 365,500         |  |   | 1,270,077          | 
|                                    |  |                              |                 |                                 |   |                    |  |   |                 |  |   |                    | 
|EBITDA                              |  | $                            | (412,967)       |                                 | $ | (434,762)          |  | $ | (2,055,465)     |  | $ | (888,301)          | 









Item 4.  Controls and Procedures.



(a)  The Companys principal executive officer and principal financial officer have reviewed the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of October 3, 2009 and have concluded that they were adequate and effective.



(b)  During the most recent fiscal quarter, there were no changes in the Companys internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that have materially affected, or are reasonably likely to materially affect, the Companys internal controls over financial reporting.

















PART II  OTHER INFORMATION





Item 6.   Exhibits





31.1-

Certification of Principal Executive Officer



31.2-

Certification of Principal Financial Officer



32-

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















10



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SIGNATURES



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





|                        |     |                                                          
|----------------------- | --- | ---------------------------------------------------------
|                        |     | DECORATOR INDUSTRIES, INC.                               
|                        |     | (Registrant)                                             
|                        |     |                                                          
|                        |     |                                                          
|Date: November 17, 2009 | By: | /s/   William A. Johnson                                 
|                        |     | William A. Johnson, President and Chief Executive Officer
|                        |     |                                                          
|                        |     |                                                          
|Date: November 17, 2009 | By: | /s/   Michael K. Solomon                                 
|                        |     | Michael K. Solomon, Chief Financial Officer              





11