<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 28, 1996

               [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-7753

                           DECORATOR INDUSTRIES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

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

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

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

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class               Name of each exchange on which registered
     -------------------               -----------------------------------------

Common Stock, Par Value $.20 Per Share                   American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                             Yes   X        No
                                  ---          ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]

Aggregate market value at March 14, 1997 of outstanding shares of Common Stock
other than shares held by officers, directors and their respective associates:
$25,858,918*

Number of shares outstanding at March 14, 1997:  2,375,513*

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

*    Includes 29,832 shares issuable upon surrender of the outstanding $.10 par
     Common Stock.

<PAGE>

NOTE:In this report, unless the context otherwise requires, Registrant or
Company means Decorator Industries, Inc. and its subsidiaries, herein sometimes
also called "Decorator Industries".  References to a particular year or the
captions "For the Year" and "At Year End" refer to the fiscal periods as
follows:

               1996  -  52 weeks ended December 28, 1996

               1995  -  52 weeks ended December 30, 1995

               1994  -  52 weeks ended December 31, 1994

               1993  -  52 weeks ended January 1, 1994

               1992  -  53 weeks ended January 2, 1993



                                     PART I


ITEM 1.  BUSINESS.

     The Company is engaged in the production and sale of window coverings,
bedspreads, furniture and complementary products.  The Haleyville Division
manufactures window coverings, bedspreads, furniture and complementary products
for sale to original equipment manufactured home builders and recreational
vehicle manufacturers.  The Liberia Division manufactures draperies and
bedspreads for sale to hotels, motels and other installations nationwide as well
as original equipment manufactured home builders.

     The Company has one industry segment and one class of products.  The
business in which the Company is engaged is a competitive environment, and it
competes with manufacturers located throughout the country.  However, no
reliable information is available to enable the Company to determine its
relative position among its competitors.  The principal methods of competition
are price, design and service.

     During 1996 one customer, Fleetwood Enterprises,  accounted for
approximately 22% of the Company's total sales.  In the event of the loss of
that customer, there would be a material adverse effect on the Company.  That
customer operates in two industries, the manufactured housing industry and the
recreational vehicle industry.  Further, purchasing decisions are made at each
individual plant of that customer.  The Company services many of these plants
and considers each of these plants to be an independent customer.

     The Company's backlog of orders at any given time is not material in amount
and is not significant in the business.  No material portion of the Company's
sales or income is derived from customers in foreign countries.

     The chief raw materials used by the Company are fabrics made from both
natural and man-made fibers.  The raw materials are obtained primarily from
converters and mills.  The Company is not dependent upon one or a very few
suppliers.  Most of its suppliers are large firms with whom, in the opinion of
management, the Company enjoys good relationships.  The Company has never
experienced any significant shortage in its supply of raw materials.

<PAGE>

     The Company has no significant patents, licenses, franchises or
concessions.  It owns certain trademarks and copyrights.  Although the Company
believes the trademarks aid in identifying its products, it is unable to
evaluate the importance of the trademarks to its business.  Expenditures for
research and development during 1996 and 1995 were not significant.

     Compliance with federal, state and local environmental protection
provisions will have no material effect upon the capital expenditures, earnings
or competitive position of the Company.

     The Company employs approximately 630 sales, production, warehouse and
administrative employees and also uses the services of independent sales
representatives.

RECENT DEVELOPMENTS

     The Company has entered into an agreement under which it acquired the
business and certain assets of Specialty Window Coverings Corp., an Elkhart,
Indiana based manufacturer of pleated shades for the recreational vehicle
market.  The acquisition was effective March 15, 1997.  The agreement provides
for a cash payment of approximately $2.3 million at closing plus conditional
payments, based on earnings, of up to $2 million over the succeeding two years.
Specialty will continue to operate from its existing facilities, which are being
expanded from 20,000 to 35,000 square feet and which will be leased by the
Company from the former owners of Specialty.  Specialty had net sales of
approximately $5 million in 1996.  The Company will recognize goodwill of
approximately $1.3 million in connection with the acquisition.

     On March 4, 1997, the Company further expanded its product line to include
furniture and cushions for the recreational vehicle market by having purchased
the assets of Action Design Interiors, also based in Elkhart, Indiana.


ITEM 2.  PROPERTIES.

     The Haleyville Division produces window coverings, bedspreads and furniture
from plants located in Haleyville, Alabama; Salisbury, North Carolina; Lakeland,
Florida; Bloomsburg, Pennsylvania; and Goshen and Elkhart, Indiana.  The
Haleyville plant is a one story building owned by the Company, which contains
approximately 54,000 square feet of manufacturing, warehouse and office space.
The Salisbury plant is a one story building of approximately 22,500 square feet
of manufacturing, warehouse and office space which is leased by the Company
under a lease including renewal options through the year 2000.  The Lakeland
plant, a one story building of approximately 7,500 square feet, is leased by the
Company for a term ending in December 1998. The Bloomsburg plant is a one story
building of approximately 42,000 square feet which is owned by the Company.  The
Goshen plant is a two-story building containing approximately 35,000 square feet
of manufacturing, warehouse and office space.  The building is leased for a term
ending August 31, 1998.  The Elkhart building contains approximately 8,000
square feet of manufacturing, warehouse and office space and is leased for a
term ending February 28, 1999.

     The Liberia Division manufactures draperies and bedspreads in facilities
located in Bossier City, Louisiana and Abbotsford, Wisconsin.  The Bossier City
plant, which contains approximately 20,000 square feet of manufacturing,
warehouse and office space, is owned by the Company.  The Abbotsford plant,
which contains approximately 21,600 square feet of manufacturing, warehouse and
office space, is leased for a term expiring November 30, 2006.


                                        2

<PAGE>

     The Company considers that its offices, plants, machinery and equipment are
well maintained, adequately insured and suitable for their purposes and that its
plants are adequate for the presently anticipated needs of the business.

     The Company owns a one story building of approximately 12,800 square feet
in Thomasville, Georgia.  This building was formerly used as a production
facility by the Haleyville Division and is currently vacant and available for
sale.


ITEM 3.  LEGAL PROCEEDINGS.

     None.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.


                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The Company's Common Stock is listed and traded on the American Stock
Exchange, AMEX symbol DII.

     Common Stock price information is set forth in the table below.  Sales
prices prior to the third quarter of 1996 have been adjusted for the four-for-
three stock split in June 1996.

                      1996 Sales Prices      1995 Sales Prices
                      -----------------      -----------------

                      High       Low         High         Low
                      ----       ---         ----         ---

     First Quarter    7          5-29/32     7-1/8        5-11/32
     Second Quarter   8-5/8      6-27/32     7-19/32      6-9/32
     Third Quarter    11-7/8     8-1/8       7-13/32      6-21/32
     Fourth Quarter   13-5/8     10-1/8      6-3/4        6


     As of March 14, 1997, the Company had 598 shareholders of record of its
Common Stock.  Of this total, 433 were holders of the $.20 par value stock and
165 were holders of the old $.10 par value stock who had not yet exchanged their
stock for the $.20 par value stock in connection with the one-for-two reverse
stock split in July 1982.  The $.20 par value stock to which the holders of the
old $.10 par value stock are entitled, together with the accrued cash dividends
thereon, are in the process of being escheated to the proper states as unclaimed
property.

     Total cash dividend payments were $.28 per share in 1996 and $.27 per share
in 1995.


                                        3

<PAGE>

                           DECORATOR INDUSTRIES, INC.
                         ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                          1996              1995              1994              1993              1992
                       -------------     -------------     -------------     -------------     --------------
OPERATIONS
----------
<S>                     <C>               <C>               <C>               <C>               <C>
Net Sales               $38,649,687       $34,207,259       $33,246,590       $28,964,223       $23,605,290
Net Income                3,605,220         2,414,678         2,823,770         2,370,232         1,528,787
                       --------------------------------------------------------------------------------------
AT YEAR-END
-----------
Total Assets             18,394,357        16,415,659        16,406,670        13,188,452        11,236,785
Long-term Obligations       549,433           587,084           629,450           431,260            68,475
Long-term Debt Ratio          4.03%             5.14%             5.30%             4.70%             1.10%
Working Capital           9,003,836         6,925,352         7,479,176         5,322,279         3,214,756
Working Capital Ratio          2.94              2.54              2.75              2.39              1.68
Stockholders' Equity     13,010,946        11,147,754        11,322,046         8,741,511         6,417,134
                       --------------------------------------------------------------------------------------

PER SHARE
---------
Net Income
 Primary                       1.31              0.93              1.07              0.94              0.63
 Fully Diluted                 1.22              0.87              0.98              0.82              0.56
Book Value                    $5.50             $4.67             $4.24             $3.44             $2.59
Cash Dividends Paid           $0.28 (a)         $0.27             $0.23             $0.15               --
</TABLE>

          Note: Per share amounts, except for cash dividends, have been adjusted
          for a four-for-three stock split effective June 17, 1996 and a two-
          for-one stock split in April 1993.

          (a) The quarterly dividend rate remained at $0.07 per share after the
          four-for-three split in June 1996, effectively increasing the dividend
          rate by 33%.


                                        4

<PAGE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

LIQUIDITY AND FINANCIAL RESOURCES:

     The Company's financial condition continues to be strong, as evidenced by
the following statistical measures:

     1)   Working capital at December 28, 1996 was $9,003,836 compared to
          $6,925,352 at December 30, 1995.

     2)   The current ratio was 2.94:1 at year-end 1996 compared to 2.54:1 at
          year-end 1995.

     3)   The liquid ratio changed from 1.9:1 at year-end 1995 to 2.3:1 at year-
          end 1996.

     4)   The long-term debt ratio continued to be minimal, at 4.0% as of
          December 28, 1996 compared to 5.1% a year earlier.

     Accounts receivable and inventories increased by 5% compared to a 13%
increase in net sales.  These assets continue to be well managed.

     Capital expenditures for 1996 were $418,557.  Management projects that
capital expenditures in 1997 will exceed somewhat the amount spent in 1996.  The
acquisition of the business and assets of Specialty Window Coverings Corp.,
referred to in "Recent Developments" in Item 1 of this report, will be funded
with the proceeds of the sale of short term investments.

     Management does not foresee any events which will adversely affect its
liquidity during 1997 and, further, the Company's financial condition is more
than adequate to finance internal growth and additional acquisitions of
profitable, growing businesses.

RESULTS OF OPERATIONS:

     The following table shows the percentage relationship to net sales of
certain items in the Company's Statement of Income:

                                                  1996       1995       1994
                                                  ----       ----       ----
     Net sales  . . . . . . . . . . . . . . .   100.0%     100.0%     100.0%
     Cost of products sold. . . . . . . . . .    74.1       75.3       71.8
     Selling and administrative expenses. . .    14.5       14.5       15.2
     Interest and investment income . . . . .     (.8)      (1.2)       (.4)
     Interest expense . . . . . . . . . . . .      .1         .1         .2
     Net income   . . . . . . . . . . . . . .     7.9        7.1        8.5

  1996 VS 1995

     Fiscal 1996's net sales increased to $38,649,687, an increase of 13% over
fiscal 1995's net sales of $34,207,259.  Sales to the manufactured housing
market increased 8% to $21,533,000; sales to the recreational market increased
by 32% to $8,696,000; and hospitality sales increased by 10% to $8,421,000.  The
increase in sales to the recreational market is largely attributable to the
acquisition made in August 1995 of a supplier to the recreational vehicle
industry.  Without this acquisition, sales to the recreational vehicle industry
would have shown a 7% increase.

     Cost of products sold as a percentage of sales decreased in 1996 to 74.1%
from 75.3% in 1995.  This improvement was accomplished by increasing
efficiencies in labor and materials.


                                        5

<PAGE>

     Selling and administrative expenses remained constant at 14.5% of sales in
both 1996 and 1995.

     The increase in net income to $3,065,220, 7.9% of net sales in 1996, from
$2,414,678, 7.1% of net sales in 1995, is the result of the increased sales
volumes and the improved efficiencies in labor and materials.

     Primary earnings per share were $1.31 in 1996 compared to $.93 in 1995, a
41% increase. This percentage was the result of the higher net income and fewer
average shares outstanding.  The Company repurchased 346,863 shares of its
outstanding Common Stock during 1995 and 1996.

  1995 VS 1994

     Net sales in 1995 increased to $34,207,259 from $33,246,590, an increase of
3%.  The Company's growth rate was negatively affected by a decline in the
recreational vehicle market and a slowing in the growth rate in the manufactured
housing market.

     Cost of goods sold as a percentage of sales increased to 75.3% in 1995 from
71.8% in 1994.  This increase was attributable to the tightening of margins in
certain markets caused by competitive pricing pressures.

     Selling and administrative expenses decreased by $88,343 due to lower
accruals for performance and incentive bonuses.

     The decrease in net income to $2,414,678 in 1995 from $2,823,770 in 1994
was attributable almost entirely to the increase in cost of goods sold.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The financial statements and reports of independent certified public
accountants listed in Item 14(a) of this report are filed under this Item 8.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     None.

                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Information concerning the directors and executive officers of the Company
is set forth below.

     William A. Bassett, age 60, has been President and a director of the
Company since 1980,  Chief Executive Officer since February 1993 and Chairman of
the Board since January 1994.

     Michael K. Solomon, age 47, has been Vice President of the Company since
November 1994, Treasurer and Chief Financial Officer of the Company since 1985
and a director of the Company since 1987.

     Jerome B. Lieber, age 76, has been Secretary and a director of the Company
since 1961.  He is Senior Counsel to the law firm of Klett Lieber Rooney &
Schorling, a Professional Corporation, Pittsburgh, Pennsylvania, which serves as
general counsel to the Company.  Mr. Lieber previously had been a senior partner
in that firm.


                                        6

<PAGE>

     Herbert Walker, age 83, has been a director of the Company since 1980.  He
has been a management consultant since 1980 and served as a registered
representative of Harvest Financial Corp., a broker-dealer, since 1982.

     Joseph N. Ellis, age 68, has been a director of the Company since 1993.  He
founded LaSalle-Deitch Co., Inc., a distributor of products for the manufactured
housing and recreational vehicle industries, in 1963 and served as its
President, Chief Executive Officer and Chairman from 1971 until his retirement
in 1992.  Mr. Ellis is currently a management consultant.

     William H. Allen, Jr., age 61, was appointed to the Board of Directors on
February 28, 1995.  He has been Vice Chairman of the Board of NationsBank N.A.
(South) since December 1995 and previously served as Chairman of the Board and
Chief Executive Officer of Intercontinental Bank.  Mr. Allen is also a director
of American Bankers Life Insurance Company and Winsloew Furniture, Inc.

     The Board of Directors is divided into three classes of directors with
staggered terms.  One class is elected at each annual meeting of shareholders
for a three-year term.  Subject to the provisions of any employment agreements
with the Company, the term of office of all executive officers is at the
discretion of the Board of Directors.

ITEM 11.  EXECUTIVE COMPENSATION.

     The following table shows the compensation of the named executive officers
of the Company for each of the last three fiscal years.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                  Long-Term
                                                                                Compensation
                                                                                ------------
                                                  Annual Compensation               Awards
                                                  -------------------               ------
   Name and                    Fiscal                                              Optioned      All Other Com-
Principal Position             Year      Salary($)    Bonus($)   Other($)(1)       Shares (#)    pensation($)(2)
------------------             ----      ---------    --------   -----------       ----------    ---------------
<S>                            <C>       <C>          <C>        <C>            <C>              <C>
William A. Bassett(3)          1996      236,156      156,000         *              33,333          34,745
Chairman of the Board,         1995      224,910       58,234         *               ---            34,745
President and Chief            1994      209,100       78,689       49,637           13,333          21,577
Executive Officer

Michael K. Solomon             1996      107,000       28,940       27,106           13,333          ----
Vice President, Treasurer      1995      104,500       14,558         *               ---            ----
and Chief Financial Officer    1994       99,500       19,672       14,483            5,999          ----
</TABLE>

--------------------
(1)  Medical/dental reimbursement plan payments, country club memberships,
     personal use of Company vehicles, and payments made in accordance with
     Company policy for disqualifying sales of Common Stock acquired upon the
     exercise of a qualified stock option.  For 1996, payment to Mr. Solomon for
     such sales was $18,059 and provided a net benefit to the Company of
     $11,919.  For 1994, payments to Messrs. Bassett and Solomon for such sales
     were $47,884 and $8,833, respectively.  All such sales during 1994 provided
     a net benefit to the Company of $94,970.  An asterisk indicates that the
     total of other annual compensation for that year was less than 10% of
     salary and bonus for that year.

(2)  Premiums paid by the Company on life and long-term disability insurance
     policies.

(3)  The Company has an employment agreement with Mr. Bassett which provides for
     an annual salary of not less than $214,200.  The agreement expires July 1,
     2004.


                                       7

<PAGE>

     The following table provides information on options granted to the named
executive officers in fiscal 1996 under the Company's 1995 Incentive Stock
Option Plan:

<TABLE>
<CAPTION>
                        OPTION GRANTS IN LAST FISCAL YEAR
                                Individual Grants
                 -------------------------------------------------    Potential Realizable Value of
                              Percent of                                 Assumed Annual Rates of
                            Total Options                             Stock Price Appreciation for
                 Options      Granted to     Exercise                        Option Term (2)
                 Granted      Employees       Price     Expiration       ----------------------
     Name        (Shs)(1)      in 1996     Per Share(1)    Date             5%           10%
     ----        --------    ------------  ------------ ----------       -------        -------
 <S>             <C>         <C>           <C>          <C>           <C>              <C>
 William A.      33,333         20.0%         $7.50       5/3/06        $157,277       $398,432
 Bassett
 Michael K.      13,333          8.0           7.50       5/3/06          62,888        159,370
 Solomon
</TABLE>


--------------------
(1)  As adjusted for the four-for-three stock split in June 1996.  Options
     heretofore granted under the 1995 Incentive Stock Option Plan have a ten
     year term and vest 20% on the date of grant and 20% annually thereafter
     through the fourth anniversary of the grant.

(2)  Potential realizable value is based on the assumption that the market price
     of the Common Stock appreciates at the annual rates shown (compounded
     annually) from the date of grant until the end of the ten year option term.
     Potential realizable value is shown net of exercise price.  These numbers
     are calculated based on the regulations promulgated by the Securities and
     Exchange Commission and do not reflect the company's estimate of future
     stock price growth.


     The following table sets forth information concerning the exercise of stock
options during 1996 by the named executive officers and the value of their
unexercised, in-the-money stock options at the end of that fiscal year (December
28, 1996).  All options outstanding at December 28, 1996, except for those
granted after 1995, were exercisable at any time prior to their respective
expiration dates.


                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
                                                                                      Value of
                          Shares Acquired       Value               Optioned Shares   Options at
Name                      on Exercise           Realized($)         at 12/28/96(#)    12/28/96($)(1)
----                      ---------------       -----------         ---------------   --------------
<S>                       <C>                   <C>                 <C>               <C>
William A. Bassett        26,666(2)             146,378             133,331           1,083,294

Michael K. Solomon        13,332(2)              83,388              45,998             357,978
</TABLE>

-----------------
(1)  Assumes a market value of $11.50 per share, which was the last reported
     sale price on the American Stock Exchange on December 27, 1996.

(2)  As adjusted for the four-for-three stock split in June 1996.


                                        8

<PAGE>

     Directors who are not employees of the Company are paid a fee of $10,000
per year for their services as directors.

     The Company's medical and dental reimbursement plan provides reimbursement
to the corporate and certain divisional officers of the Company and their
dependents (as defined in Section 152 of the Internal Revenue Code) for their
medical and dental expenses.  Benefits under the plan are limited to 10% of the
participant's compensation during the plan year.  The plan also prohibits any
participant from receiving "double reimbursement", i.e. if a participant
receives reimbursement from another source, he or she must remit to the Company
benefits received under the plan.

     The Company's 1984 Incentive Stock Option Plan, which expired February 22,
1994, authorized the granting to key employees of options to purchase up to
604,666 shares of the Company's Common Stock.  The purchase price of optioned
shares is the fair market value of the Common Stock on the date of grant, and
the maximum term of the options is ten years; in the case of options granted to
employees who owned more than 10% of the outstanding Common Stock, however, the
purchase price was 110% of the fair market value of the Common Stock on the date
of grant and the term of the option was five years.  The number of optioned
shares and the purchase price per share are subject to adjustment for stock
splits, stock dividends, reclassifications and the like.

     On April 3, 1995 the Board of Directors adopted, and on June 5, 1995 the
stockholders approved, the Company's 1995 Incentive Stock Option Plan (the "1995
Plan") which has a term of ten years.  The 1995 Plan authorizes the issuance of
up to 333,332 shares of Common Stock pursuant to stock options granted to key
employees of the Company.  The purchase price of optioned shares must be the
fair market value of the Common Stock on the date of grant, and the maximum term
of the options is ten years; in the case of options granted to employees who own
more than 10% of the outstanding Common Stock, however, the purchase price must
be 110% of the fair market value of the Common Stock on the date of grant and
the term of the option cannot exceed five years.  The number of shares that may
be issued under the 1995 Plan, the number of optioned shares and the purchase
price per share are subject to adjustment for stock splits, stock dividends,
reclassifications and the like.


                                        9

<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Information concerning the common stockholding at March 14, 1997 of the
directors and named executive officers of the Company, and of the directors and
executive officers as a group, is set forth in the following table.  Unless
otherwise indicated, each stockholder has sole voting and investment power with
respect to the shares listed.

                                            Shares
Name or Group                         Beneficially owned   Percent of Class (1)
-------------                         ------------------   --------------------

William A. Bassett                        241,547 (2)              9.71%
Michael K. Solomon                         62,663 (3)              2.60
Jerome B. Lieber                            8,772 (4)               ---
Herbert Walker                              3,000                   ---
Joseph N. Ellis                             1,600                   ---
William H. Allen, Jr.                       2,500                   ---
All directors and executive officers
 as a group                               320,082(5)              12.70

----------------------------
(1)  Shares which the named stockholder has the right to acquire within 60 days
     are deemed outstanding for the purpose of computing that stockholder's
     percentage.

(2)  Includes 113,331 optioned shares which may be acquired within 60 days.

(3)  Includes 31,997 optioned shares which may be acquired within 60 days.

(4)  Includes 3,226 shares held in a charitable trust as to which Mr. Lieber
     disclaims beneficial ownership.

(5)  Includes 145,328 optioned shares which may be acquired within 60 days.

     Coury Investments, Ltd., a real estate and securities investment limited
partnership organized in Florida, informed the Company in mid-1993 that it then
beneficially owned 180,000 shares of the Company's Common Stock.  The Company
has no further information regarding Coury's ownership of Common Stock.

     FMR Corp. of Boston, Massachusetts, has furnished the Company a copy of its
Schedule 13G in which it reported that as of December 31, 1996 Fidelity
Management & Research Company, a wholly-owned subsidiary of FMR Corp. and a
registered investment adviser, had sole investment power with respect to 241,866
shares (10.18%) of the Company's Common Stock.

     ZPR Investment Management Inc. of Orange City, Florida, a registered
investment adviser, has furnished the Company a copy of its Schedule 13G dated
January 10, 1997 in which it reported that it had sole voting power with respect
to 172,697 shares (7.27%) of the Company's Common Stock.


                                       10

<PAGE>

     Laifer Capital Management, Inc. of New York, New York has furnished the
Company a copy of its Schedule 13G dated February 7, 1996 in which it reported
beneficial ownership of a total of 98,400 shares of the Company's Common Stock,
including sole power to vote 72,400 shares, sole power to dispose of 65,000
shares and shared power to dispose of 33,400 shares.  No further information has
been received from that company.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     None.


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

     (a)  THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:

          FINANCIAL STATEMENTS AND SCHEDULES

          (1)  Report of Independent Certified Public Accountants

          (2)  Consolidated Balance Sheet - December 28, 1996 and December 30,
               1995

          (3)  Consolidated Statement of Income for the three fiscal years ended
               December 28, 1996

          (4)  Consolidated Statement of Stockholders' Equity for the three
               fiscal years ended December 28, 1996

          (5)  Consolidated Statement of Cash Flows for the three fiscal years
               ended December 28, 1996

          (6)  Notes to Consolidated Financial Statements

          (7)  Report of Independent Certified Public Accountants on Financial
               Statement Schedule

          Schedule VIII - Valuation and Qualifying Accounts

          All other schedules are omitted because they are not required or are
          inapplicable or the information is included in the financial
          statements or notes thereto.

     EXHIBITS

      3A       Articles of Incorporation as amended to date, filed as Exhibit 3A
               to Form 10-K for the fiscal year ended December 28, 1985 and
               incorporated herein by reference.

     3B.1      By-laws as amended to date, filed as Exhibit 3B.1 to Form 10-Q
               for the quarter ended July 2, 1988 and incorporated herein by
               reference.


                                       11

<PAGE>

     10E       Lease dated February 9, 1984 between the registrant, as lessee,
               and Leon and Eleanor Bradshaw covering property at 500 North Long
               Street, Salisbury, North Carolina, filed as Exhibit 10(b)(4)(iv)
               to Registration Statement No. 2-92853 and incorporated herein by
               reference.

     10H       Lease Agreement dated December 13, 1983 covering property at 101
               West Linden Street, Abbotsford, Wisconsin, and assignment thereof
               to the registrant, as lessee, dated October 2, 1985, filed as
               Exhibit 10H to Form 10-K for the fiscal year ended December 28,
               1985 and incorporated herein by reference.

     10H.1     Lease Modification Agreement dated May 20, 1988 regarding Exhibit
               10H, filed as Exhibit 10H.1 to Form 10-K for the fiscal year
               ended December 31, 1988 and incorporated herein by reference.

     10H.2     Lease Modification Agreement dated September 30, 1996 regarding
               Exhibit 10H, filed herewith.

     10K.1     1984 Incentive Stock Option Plan, as amended to date, filed as
               Exhibit 10K.1 to Form 10-Q for the quarter ended October 3, 1987
               and incorporated herein by reference.*

     10M.1     Medical and Dental Reimbursement Plan, as amended to date, filed
               as Exhibit 10M.1 to Form 10-K for the fiscal year ended January
               3, 1987 and incorporated herein by reference.*

     10T       Employment Agreement dated August 2, 1994 between the registrant
               and William Bassett, filed as Exhibit 10T to Form 10-Q for the
               quarter ended July 2, 1994 and incorporated herein by reference.*

     10U       1995 Incentive Stock Option Plan, filed as Exhibit 10U to Form
               10-K for the fiscal year ended December 30, 1995 and incorporated
               herein by reference.*

     10V       Purchase and Sale Agreement dated March 14, 1997 between the
               registrant and Specialty Window Coverings Corp., filed herewith.

     11L       Statement re computation of fully diluted income per share, filed
               herewith.

     24D       Consent of Accountants, filed herewith.

     27        Financial Data Schedule, filed herewith.
------------
*Management contract or compensatory plan.


     (b)       REPORTS ON FORM 8-K.

               No reports on Form 8-K were filed during the last quarter of
               1996.



                                       12

<PAGE>

                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                              DECORATOR INDUSTRIES, INC.
                                   (Registrant)


                              By:  /s/ Michael K. Solomon
                                  -----------------------------------
                                     Michael K. Solomon
                                      Vice President

Dated:  March 21, 1997

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>

Name                     Title                        Signature                 Date
----                     -----                        ---------                 ----
<S>                      <C>                          <C>                       <C>
William A. Bassett       Chairman, President,         /s/ William A. Bassett    March 21, 1997
                         Chief Executive              ------------------------
                         Officer and
                         Director

Michael K. Solomon       Vice President, Treasurer,   /s/ Michael K. Solomon    March 21, 1997
                         Principal Financial          ------------------------
                         and Accounting
                         Officer, and
                         Director

Jerome B. Lieber         Director                     /s/ Jerome B. Lieber      March 21, 1997
                                                      ------------------------

Herbert Walker           Director                     /s/ Herbert Walker        March 21, 1997
                                                      ------------------------

Joseph N. Ellis          Director                     /s/ Joseph N. Ellis       March 21, 1997
                                                      ------------------------

William H. Allen, Jr.    Director                     /s/ William H. Allen, Jr. March 21, 1997
                                                      ------------------------
</TABLE>


                                       13

<PAGE>

                          INDEPENDENT AUDITORS' REPORT





To the Board of Directors
   and Stockholders
Decorator Industries, Inc.


     We have audited the accompanying consolidated balance sheets of Decorator
Industries, Inc. and subsidiaries as of December 28, 1996 and December 30, 1995
and the related consolidated statements of income and stockholders' equity and
cash flows for each of the three fiscal years in the period ended December 28,
1996.  These financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Decorator Industries, Inc. as of December 28, 1996 and December 30, 1995, and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended December 28, 1996 in conformity with generally
accepted accounting principles.




                              /s/ Louis Plung & Company
                              LOUIS PLUNG & COMPANY
                              Certified Public Accountants


Pittsburgh, Pennsylvania
February 8, 1997


                                       F-1
<PAGE>

                              DECORATOR INDUSTRIES, INC
                                    BALANCE SHEET
Fiscal Year End

                                                            1996          1995
                                                            ----          ----
                  ASSETS
CURRENT ASSETS:
 Cash and Cash Equivalents                            $4,714,356    $5,269,772
 Short-term Investments                                2,539,613        14,607
 Accounts Receivable, less allowance for
   doubtful accounts ($232,302 and $229,722 )          2,972,572     2,776,039
 Note Receivable                                          80,000        80,000
 Inventories                                           3,083,004     3,005,383
 Prepaid Expenses                                        117,269       126,373
 Prepaid and Deferred Income Taxes                       136,000       159,000
                                                      ----------    ----------
Total Current Assets                                  13,642,814    11,431,174
                                                      ----------    ----------
PROPERTY & EQUIPMENT:
 Land                                                    130,408       130,408
 Buildings & Improvements                              2,224,605     2,205,800
 Equipment                                             3,042,968     2,740,656
                                                      ----------    ----------
Total Property & Equipment                             5,397,981     5,076,864
 Less:  Accumulated Depreciation and Amortization      2,249,848     1,988,557
                                                      ----------    ----------
Net Property & Equipment                               3,148,133     3,088,307
                                                      ----------    ----------
EXCESS OF COST OVER NET ASSETS ACQUIRED
 less accumulated amortization of $874,225 and
 $815,438                                              1,402,818     1,461,605
NOTE RECEIVABLE                                           60,000       140,000
OTHER ASSETS                                             140,592       294,573
                                                      ----------    ----------
TOTAL ASSETS                                         $18,394,357   $16,415,659
                                                      ----------    ----------
                                                      ----------    ----------

      LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Accounts Payable                                     $2,624,552    $2,751,329
 Current Maturities of long-term debt                     41,685        41,032
 Accrued Expenses:
   Income taxes                                           63,397        60,873
   Compensation                                        1,443,921     1,072,321
   Other                                                 465,423       580,267
                                                      ----------    ----------
Total Current Liabilities                              4,638,978     4,505,822
                                                      ----------    ----------

LONG-TERM DEBT                                           549,433       587,083
DEFERRED INCOME TAXES                                    195,000       175,000
                                                      ----------    ----------
Total Liabilities                                      5,383,411     5,267,905
                                                      ----------    ----------

STOCKHOLDERS' EQUITY:
 Common stock $.20 par value:
   Authorized shares, 5,000,000 ;
   Issued shares, 2,725,462 and 2,644,855                545,094       528,973
 Paid-in capital                                       1,546,152     1,692,185
 Retained Earnings                                    12,478,625    12,228,865
                                                      ----------    ----------
                                                      14,569,871    14,450,023
 Less:  Treasury Stock, at cost:
   369,087 and 853,143 shares                          1,558,925     3,302,269
                                                      ----------    ----------
Total Stockholders' Equity                            13,010,946    11,147,754
                                                      ----------    ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY             $18,394,357   $16,415,659
                                                      ----------    ----------
                                                      ----------    ----------
The accompanying notes are an integral part of the financial statements.


                                         F-2
<PAGE>

                              DECORATOR INDUSTRIES, INC.
                                 STATEMENT OF INCOME



                                                      For the Year
                                                      ------------
                                           1996           1995           1994
                                           ----           ----           ----
INCOME:
    Net Sales                         $38,649,687    $34,207,259    $33,246,590
                                      -----------    -----------    -----------
                                      -----------    -----------    -----------
COST AND EXPENSES:
    Cost of products sold              28,626,094     25,760,666     23,881,370
    Selling and administrative          5,611,222      4,961,007      5,049,350
    Interest and dividend income        (305,370)      (420,329)      (129,668)
    Interest expense                       38,521         47,237         61,768
                                       ----------     ----------     ----------

Total costs and expenses               33,970,467     30,348,581     28,862,820
                                       ----------     ----------     ----------


Income before income taxes              4,679,220      3,858,678      4,383,770
Income taxes                            1,614,000      1,444,000      1,560,000
                                        ---------      ---------      ---------


NET INCOME                             $3,065,220     $2,414,678     $2,823,770
                                      -----------    -----------    -----------
                                      -----------    -----------    -----------


TOTAL PRIMARY EARNINGS PER SHARE            $1.31          $ .93          $1.07
                                            -----          -----          -----
                                            -----          -----          -----
FULLY DILUTED EARNINGS PER SHARE            $1.22          $ .87          $ .98
                                            -----          -----          -----
                                            -----          -----          -----

Average Number of shares
    Outstanding:
    Primary                             2,333,972      2,585,568      2,629,295
    Fully diluted                       2,511,610      2,790,177      2,894,269




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


                                         F-3

<PAGE>

                              DECORATOR INDUSTRIES, INC.
                          STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                COMMON            PAID-IN             RETAINED            TREASURY
                                STOCK             CAPITAL             EARNINGS             STOCK               TOTAL
                                -----             -------             --------             -----               -----
<S>                          <C>                <C>                 <C>                 <C>                 <C>
Balance at
January 1, 1994              $  512,917         $ 1,354,844         $ 7,965,077         $(1,091,327)        $ 8,741,511

Transactions for 1994
Net Profit                                                            2,823,770                               2,823,770

Issuance of stock for
Exercise of options               9,800             115,509                                 (61,782)             63,527

Stock option tax
benefit                                             149,475                                                     149,475

Dividends Paid                                                         (456,237)                               (456,237)
                              ---------          ----------          ----------          ----------          ----------

Balance at
December 31, 1994               522,717           1,619,828          10,332,610          (1,153,109)         11,322,046

Transactions for 1995
Net Profit                                                            2,414,678                               2,414,678

Issuance of stock for
exercise of options               6,256              60,903                                 (11,019)             56,140

Stock option tax
benefit                                              11,454                                                      11,454

Purchase of common
stock for treasury                                                                       (2,138,141)         (2,138,141)

Dividends Paid                                                         (518,423)                               (518,423)
                              ---------          ----------          ----------          ----------          ----------

Balance at
December 30, 1995               528,973           1,692,185          12,228,865          (3,302,269)         11,147,754

Transactions for 1996
Net Profit                                                            3,065,220                               3,065,220

Issuance of stock for
exercise of options              16,122             148,839                                                     165,012

Stock option tax
benefit                                              18,000                                                      18,000

Purchase of common
stock for treasury                                                                         (769,829)           (769,829)

Dividends Paid                                                         (613,922)                               (613,922)

Record stock split                                 (312,872)         (2,201,539)         2,513,172               (1,290)
                              ---------          ----------          ----------          ----------          ----------

Balance at
December 28, 1996            $  545,095         $ 1,546,152         $12,478,624         $(1,558,926)        $13,010,945
                              ---------          ----------          ----------          ----------          ----------
                              ---------          ----------          ----------          ----------          ----------
</TABLE>



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


                                         F-4

<PAGE>

                              DECORATOR INDUSTRIES, INC.
                               STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                            For The Year
                                                            1996                1995                1994
                                                            ----                ----                ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                        <C>                 <C>                 <C>
  Net Income (Loss)                                        $3,065,220          $2,414,678          $2,823,770
  Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization                             412,172             380,100             347,100
    Provision for losses on accounts receivable                40,000              72,374              45,000
    Deferred Taxes                                             43,000              40,000            (87,000)
    (Gain) loss on disposal of assets                           (264)               (623)                 505
  Increase (decrease) from changes in:
    Accounts receivable                                     (236,533)           (148,611)             107,838
    Inventory                                                (77,621)           (248,624)           (374,199)
    Short-term investments                                (2,525,006)           2,131,725         (1,017,642)
    Prepaid expenses                                            9,104            (28,103)             (2,729)
    Other assets                                              153,981            (18,914)            (54,146)
    Accounts payable                                        (126,777)             366,474             161,190
    Accrued expenses                                          259,280           (252,875)             307,554
                                                           ----------          ----------          ----------
Net cash provided by operating activities                   1,016,556           4,707,601           2,257,241
                                                           ----------          ----------          ----------


CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                      (418,557)           (462,704)         (1,005,241)
  Proceeds from property dispositions                           5,609              33,477               8,940
  Note receivable                                              80,000              80,000             155,000
  Net cash paid for acquisition                                   ---           (471,926)                ---
                                                           ----------          ----------          ----------
Net cash used in investing activities                       (332,948)           (821,153)           (841,301)
                                                           ----------          ----------          ----------


CASH FLOWS FROM FINANCING ACTIVITIES:
  Long term debt payments                                    (36,997)            (53,740)           (101,093)
  Proceeds from debt on new building                              ---                 ---             269,046
  Dividend payments                                         (613,922)           (518,423)           (456,235)
  Proceeds from exercise of stock options                     165,012              56,139              63,525
  Stock option tax benefit                                     18,000              11,454             149,475
  Purchase of common stock for treasury                     (769,829)         (2,138,141)                 ---
 Cash in lieu of fractional shares                            (1,288)                 ---                 ---
                                                           ----------          ----------          ----------
Net cash used in financing activities                     (1,239,024)         (2,642,711)            (75,282)
Net increase (decrease) in cash and cash equivalents        (555,416)           1,243,737           1,340,658
Cash and cash equivalents at beginning of year              5,269,772           4,026,035           2,685,377
                                                           ----------          ----------          ----------
Cash and cash equivalents at end of period                 $4,714,356          $5,269,772          $4,026,035
                                                           ----------          ----------          ----------
                                                           ----------          ----------          ----------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

INTEREST                                                      $29,393             $43,899             $32,139
INCOME TAXES                                               $1,568,476          $1,460,794          $1,507,575

</TABLE>

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


                                         F-5

<PAGE>

                              DECORATOR INDUSTRIES, INC.
                            NOTES TO FINANCIAL STATEMENTS


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    PRINCIPLES OF CONSOLIDATION

    The consolidated financial statements include the accounts of the Company
    and all subsidiary companies.  All significant intercompany accounts and
    transactions have been eliminated in consolidation.

    FISCAL YEAR

    The Company's fiscal year is a 52-53 week period ending the Saturday
    nearest to December 31, which results in every sixth year containing 53
    weeks.  Fiscal years 1996, 1995 and 1994 were 52-week periods ending
    December 28, 1996, December 30, 1995 and December 31, 1994.

    INVENTORIES

    Inventories are stated at the lower of cost (first-in, first-out method) or
    market.

    PROPERTY AND DEPRECIATION

    Buildings and equipment are stated at cost, and depreciated on both
    straight-line and accelerated methods over estimated useful lives.
    Leasehold improvements are capitalized and amortized over the assets'
    estimated useful lives or remaining terms of leases, if shorter.  Equipment
    is depreciated over 3-10 years, buildings over 20-30 years and leasehold
    improvements over 5-10 years.

    EXCESS OF COST OVER NET ASSETS ACQUIRED

    The excess of investment costs over the fair value of net assets related to
    the Haleyville Manufacturing division acquired in April, 1973 and the
    Liberia Manufacturing division acquired in October, 1985 are being
    amortized over a period of 40 years.  Paragon Interiors, acquired in
    August, 1995 is being amortized also over a period of 40 years.
    Amortization of $58,786 was charged to income during fiscal year ended
    12/28/96, $56,417 in fiscal year ended 12/30/95, and $54,724 in fiscal year
    ended 12/31/94.

    The Company evaluates the impairment of goodwill on the basis of whether
    goodwill is recoverable from the projected undiscounted net income before
    goodwill amortization of the related assets.

    CASH AND CASH EQUIVALENTS

    For purposes of the consolidated statements of cash flows, the Company
    considers all highly liquid investments with a maturity of three months or
    less at the time of purchase to be cash equivalents.

    Cash and cash equivalents consist of the following:

                                     1996                1995
                                     ----                ----
    General Funds                 $1,116,347          $4,054,772
    Demand Notes                   2,805,000           1,215,000
    Repurchase agreements            743,009              ----
                                   ---------           ---------
                                  $4,714,356          $5,269,772
                                   ---------           ---------
                                   ---------           ---------

    The demand notes are guaranteed by letters-of-credit.


                                         F-6

<PAGE>

                              DECORATOR INDUSTRIES, INC.
                            NOTES TO FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

    SHORT-TERM INVESTMENTS

    Short-term investments are categorized as trading securities.  The
    estimated fair values of the company's trading securities, which are the
    amounts reflected in the balance sheet, are based on quoted market prices.
    An unrealized gain of $25,204 is included in income for year ended December
    28, 1996 compared to a realized gain of $125,601 for the year ended
    December 30, 1995.

    DEFERRED INCOME TAXES

    The Company accounts for income taxes in accordance with the Statement of
    Financial Accounting Standards No. 109 "Accounting for Income Taxes," which
    requires the recognition of deferred tax liabilities and assets at
    currently enacted tax rates for the expected future tax consequences of
    events that have been included in the financial statements or tax returns.

    PER SHARE INFORMATION

    Per share amounts of common stock are based on the average number of common
    shares outstanding during each period.

    Fully diluted earnings per share were computed based on the assumption that
    the stock options were exercised.  The dilutive effect of the stock options
    was determined using the "treasury stock" method.

    CREDIT RISK


    The Company sells into three different markets, each primarily, on thirty
    day terms.  Within each market the Company's customers are spread over a
    wide geographic area.  As such the Company believes that it does not have
    an abnormal concentration of credit risk within any one market or any one
    geographic area.

    ESTIMATES

    The preparation of financial statements in conformity with generally
    accepted accounting principles requires management to make estimates and
    assumptions that affect certain reported amounts and disclosures.

    FAIR VALUE OF FINANCIAL INSTRUMENTS

    Marketable securities are carried at fair value. All other financial
    instruments are carried at amounts believed to approximate fair value.

    STOCK SPLIT

    The Company declared a four-for-three stock split effective June 17, 1996.
    Per share and share data have been adjusted to reflect this stock split.

(2) INVENTORIES

    Inventories consisted of the following classifications:

                                               1996           1995
                                               ----           ----
      Raw materials & supplies              $2,854,066     $2,814,309
      In process & finished goods              228,938        191,075
                                               -------        -------
                                            $3,083,004     $3,005,383
                                             ---------      ---------
                                             ---------      ---------


                                         F-7

<PAGE>

                              DECORATOR INDUSTRIES, INC.
                            NOTES TO FINANCIAL STATEMENTS

(3) NOTES RECEIVABLE
       Notes receivable consist of the following:
                                                            Fiscal Year-end
                                                            ---------------
                                                           1996          1995
                                                           ----          ----
          The note is receivable in monthly
          installments of $6,667, plus interest
          at 8%.  The note is secured by the
          land and building sold during 1993.           $140,000       $220,000
              Less current portion                        80,000         80,000
                                                          ------         ------
              Long-term portion                         $ 60,000       $140,000
                                                          ------         ------
                                                          ------         ------

       Maturities of notes receivable are as follows:

              Fiscal Year Ending                          Amount
              ------------------                          ------
                   1997                                   80,000
                   1998                                   60,000
                                                          ------
                   TOTAL                                $140,000
                                                         -------
                                                         -------

(4) LEASES

    The Company leases certain buildings and equipment used in its operations.
    Building leases generally provide that the company bear the cost of
    maintenance and repairs and other operation expenses.  Rent expense was
    $248,286 in 1996, $209,958 in 1995, and $229,191 in 1994.

    Commitments under these leases extend through November, 2006, and are as
    follows:

                              1997           $ 209,085
                              1998             143,795
                              1999              90,564
                              2000              90,564
                        Thereafter             309,737

(5) COMMITMENTS

    The Company has commitments under certain employment and non-compete
    agreements entered into with individuals in management positions.  The
    commitments under these agreements are payable $214,200, $214,200, and
    $214,200, respectively, from 1997 through 1999 and $963,900 thereafter.

(6) SIGNIFICANT CUSTOMERS

    Sales to one customer accounted for 22.5%, 25.1%, and 31.3% of Company
    sales in 1996, 1995, and 1994, respectively.  This customer, Fleetwood
    Enterprises, operates in two industries, the Manufactured Housing Industry
    and the Recreational Vehicle Industry.  Further, purchasing decisions are
    made at each individual plant of that customer.  The Company services many
    of these plants and considers each of these plants to be an independent
    customer.


                                         F-8

<PAGE>

                              DECORATOR INDUSTRIES, INC.
                            NOTES TO FINANCIAL STATEMENTS



(7) LONG TERM-DEBT AND CREDIT ARRANGEMENTS

        Long-term debt consists of the following:

                                                       1996               1995
                                                       ----               ----
      Note payable in monthly payments of
      $2,088 at 4% interest. Term is 15 years.
      This note is secured by the first mortgage
      on the Bloomsburg, PA building.                $215,372          $230,137

      Bond payable in monthly installments
      thru November, 2008.  The interest
      rate is variable and is currently less
      than 4%.  This bond is secured by the
      Company's Bloomsburg, PA property.              375,746           397,978
                                                      -------           -------
                                                      591,118           628,115
      Less amount due within one year                  41,685            41,032
                                                      -------           -------
                                                    $ 549,433         $ 587,083
                                                    ---------         ---------
                                                    ---------         ---------

      Principal payments on long-term debt for the five years subsequent to
      December 28, 1996 are as follows:

                         1997             $42,000
                         1998              42,000
                         1999              43,000
                         2000              43,000
                         2001              44,000


                                         F-9

<PAGE>

                              DECORATOR INDUSTRIES, INC.
                            NOTES TO FINANCIAL STATEMENTS

(8) STOCK OPTIONS

    At December 28, 1996 the Company had options outstanding under two fixed
    stock option plans, which are described below. The Company applies APB
    Opinion 25 and related interpretations in accounting for its plans.
    Accordingly, no compensation cost has been recognized for its fixed stock
    option plans. Had compensation cost for the Company's two fixed stock
    option plans been determined based on the fair value at the grant dates for
    awards under those plans consistent with the method of FASB 123, the
    Company's net income and earnings per share would have been reduced to the
    pro forma amounts indicated below:
                                           1996          1995           1994
                                           ----          ----           ----
    Pro forma net income               $3,007,470     $2,414,678     $2,787,965
    Pro forma earnings per share:
      Primary                             $1.29          $0.93          $1.06
      Fully diluted                       $1.20          $0.87          $0.96

    During the initial phase-in period of FASB 123 the pro forma disclosure may
    not be representative of the impact on net income in future years.

    Under the 1984 Incentive Stock Option Plan which expired in 1994, the
    Company granted options to its employees for up to 604,666 shares (less the
    number of shares issued under the 1979 plan). Under the 1995 Incentive
    Stock Option Plan, the Company may grant options to its key employees for
    up to 333,332 shares of common stock. Under both plans, the exercise price
    of the option equals the fair market price of the Company's stock on the
    date of the grant and an option's maximum term is 10 years. During 1996
    options to purchase 166,662 shares under the 1995 Incentive Stock Option
    Plan were granted. The options granted in1996 vest 20% each year starting
    with the date of the grant.

    The fair value of each option grant is estimated on the date of grant using
    the Flexible Binomial options-pricing method with the following
    weighted-average assumptions used for the grants in 1996, 1995, and 1994,
    respectively: dividend yield of 3.6 percent for all years; expected
    volatility of 49.6 percent for all years; risk-free interest rate of 6.4
    percent for all years; and expected life of 3.7 years for all grants.

    A summary of the status of the Company's outstanding stock options as of
    December 28, 1996, December 30, 1995, and December 31, 1994, and changes
    during the years ending on those dates is presented below:

<TABLE>
<CAPTION>
                                                    1996                   1995                 1994
                                                    ----                   ----                 ----
                                                        Weighted               Weighted             Weighted
                                                        Average                Average              Average
                                              Shares    Exercise    Shares     Exercise   Shares    Exercise
<S>                                           <C>       <C>         <C>        <C>        <C>       <C>
         Outstanding at beginning of year     258,954     $1.86     315,320     $1.81     442,121     $1.43
         Granted                              166,662     $7.50         -          -       20,665     $7.88
         Exercised                            100,360     $1.64      56,366     $1.56     147,466     $1.52
         Forfeited                                -          -          -          -          -          -
                                              -------               -------               -------
         Outstanding at year-end              325,256     $4.82     258,954     $1.86     315,320     $1.81
                                              -------               -------               -------
                                              -------               -------               -------

         Options exercisable at year-end      191,926               258,954               315,320
         Weighted-average fair value of        $2.63
         options granted during the year

         The following information applies to fixed stock options outstanding at December 28, 1996:

              Number outstanding                                    325,256
              Range of exercise prices                              $.89 to $7.88
              Weighted-average exercise price                       $4.82
              Weighted-average remaining contractual life           6.9 years
</TABLE>


                                         F-10

<PAGE>

                              DECORATOR INDUSTRIES, INC.
                            NOTES TO FINANCIAL STATEMENTS


(9) INCOME TAXES

    A summary of income taxes is as follows:


                                 1996           1995           1994
                                 ----           ----           ----
    Current:


      Federal                $1,350,000     $1,169,000     $1,400,000

      State                     221,000        235,000        247,000

    Deferred (Benefit)           43,000         40,000       (87,000)
                              ---------      ---------      ---------
      Total                  $1,614,000     $1,444,000     $1,560,000
                             ----------     ----------     ----------
                             ----------     ----------     ----------

    Temporary differences between the financial statement carrying amounts and
    tax bases of assets and liabilities that give rise to net deferred income
    tax liability relate to the following:

                                                        1996            1995
                                                        ----            ----
    Property and equipment,
    due to differences
    in depreciation                                $  166,000      $  129,000

    Installment sale of land
    & building                                         29,000          46,000

    Inventories, due to
    additional cost recorded
    for income tax purposes                           (11,000)        (10,000)

    Accounts receivable, due
    to allowance for doubtful
    accounts                                          (88,000)        (87,000)

    Accrued liabilities, due to
    expenses not yet deductible
    for income tax purposes                           (37,000)        (62,000)
                                                      -------         -------

    Net deferred income tax (asset) liability      $   59,000      $   16,000
                                                       ------          ------
                                                       ------          ------

    The net deferred income tax liability is presented in the balance sheets as
    follows:

                                                        1996            1995
                                                        ----            ----
    Current Asset                                  $  136,000      $  159,000
    Long-term Liability                               195,000         175,000


                                         F-11

<PAGE>

                              DECORATOR INDUSTRIES, INC.
                            NOTES TO FINANCIAL STATEMENTS

(9) INCOME TAXES (Continued)

    The effective income tax rate varied from the statutory Federal tax rate as
    follows:

                                   1996           1995           1994
                                   ----           ----           ----
    Federal statutory rate        34.0%          34.0%          34.0%

    State income
    taxes, net of
    federal income
    tax benefit                    3.3            4.2            3.8
    Other                         (2.8)           (.8)          (2.2)
                                 ------         ------         ------
    Effective income tax rate     34.5%          37.4%          35.6%
                                  -----          -----          -----
                                  -----          -----          -----


(10) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                             FIRST         SECOND          THIRD         FOURTH
    1996                   QUARTER        QUARTER        QUARTER        QUARTER           YEAR
    ----                   -------        -------        -------        -------           ----
<S>                    <C>           <C>             <C>            <C>            <C>
    Net Sales           $9,439,498    $10,540,139     $9,601,465     $9,068,585    $38,649,687
    Gross Profit         2,336,564      2,833,395      2,539,800      2,313,834     10,023,593
    Net Income             622,726        910,548        813,487        718,459      3,065,220
    Earnings per
     Common share:
     Primary                  .27            .39            .35            .30           1.31
     Fully Diluted            .25            .37            .31            .29           1.22

    Average Common
     Shares
     Outstanding:
     Primary             2,307,885      2,326,990      2,345,963      2,354,930      2,333,972
     Fully Diluted       2,482,231      2,478,501      2,543,939      2,541,768      2,511,610


                             FIRST         SECOND          THIRD         FOURTH
    1995                   QUARTER        QUARTER        QUARTER        QUARTER           YEAR
    ----                   -------        -------        -------        -------           ----

    Net Sales           $8,275,431     $8,749,072     $8,560,400     $8,622,356    $34,207,259
    Gross Profit         2,232,103      2,243,625      1,922,047      2,048,818      8,446,593
    Net Income             680,445        677,283        524,753        532,197      2,414,678
    Earnings per
     Common share:
     Primary                  .26            .26            .20            .21            .93
     Fully Diluted            .24            .24            .19            .20            .87

    Average Common
     Shares
     Outstanding:
     Primary             2,660,425      2,596,021      2,571,030      2,514,792      2,585,568
     Fully Diluted       2,897,181      2,797,437      2,767,058      2,699,463      2,790,177
</TABLE>


                                         F-12

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS
                         ON FINANCIAL STATEMENT SCHEDULE



The Board of Directors
  and Stockholders
Decorator Industries, Inc.


     The audit referred to in our opinion dated February 8, 1997 of the
financial statements as of December 28, 1996 and for each of the three fiscal
years then ended includes the related supplemental financial schedule as listed
in Item 14(a), which, when considered in relation to the basic financial
statements, presents fairly in all material respects the information shown
therein.


                         /s/ Louis Plung & Company
                         LOUIS PLUNG & COMPANY
                         Certified Public Accountants


Pittsburgh, Pennsylvania
February 8, 1997


                                      F-13

<PAGE>

                              DECORATOR INDUSTRIES, INC.
                  SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
       COLUMN A               COLUMN B              COLUMN C               COLUMN D      COLUMN E
                                                    Additions
                                                (1)            (2)
                                            Charged to     Charged to
                             Balance at        Costs          Other                      Balance at
                              Beginning         and         Accounts      Deductions         End
Description                   of Period      Expenses       Described      Describe       of Period
-----------                   ---------      --------       ---------      --------       ---------
<S>                          <C>             <C>           <C>           <C>             <C>
DEDUCTED FROM ASSETS
  TO WHICH THEY APPLY:

ALLOWANCE FOR DOUBTFUL
  ACCOUNTS

    1996                       $229,722       $ 40,000         -0-       $ 37,420(A)       $232,302

    1995                        199,659         72,374         -0-         42,311(A)        229,722

    1994                        212,005         45,000         -0-         57,346(A)        199,659
</TABLE>

(A) Write-off bad debts


                                         F-14

<PAGE>

                           DECORATOR INDUSTRIES, INC.

                Form 10-K For Fiscal Year Ended December 28, 1996
                           Commission File No. 1-7753

                                  EXHIBIT INDEX

                                                          Sequentially
Exhibit No.  Document                                     Numbered Page
-----------  --------                                     -------------

   3A        Articles of Incorporation as amended 
             to date*

   3B.1      By-laws as amended to date*

   10E       Lease dated February 9, 1984 between 
             Registrant, as lessee, and Leon and 
             Eleanor Bradshaw covering property at 
             500 North Long Street, Salisbury, North 
             Carolina*

   10H       Lease Agreement dated December 13, 1983 
             covering property at 101 West Linden Street,
             Abbotsford, Wisconsin, and assignment 
             thereof to the registrant, as lessee, dated 
             October 2, 1985*

   10H.1     Lease Modification Agreement dated May 20, 
             1988 regarding Exhibit 10H*

   10H.2     Lease Modification Agreement dated 
             September 30, 1996 regarding Exhibit 10H

   10K.1     1984 Incentive Stock Option Plan, as amended
             to date*

   10M.1     Medical and Dental Reimbursement Plan, as 
             amended to date*

   10T       Employment Agreement dated August 2, 1994 
             between the registrant and William Bassett*

   10U       1995 Incentive Stock Option Plan*

   10V       Purchase and Sale Agreement dated March 14,
             1997 between the registrant and Specialty 
             Windows Corp.

   11L       Statement re computation of fully diluted
             income per share

   24D       Consent of Accountants

   27        Financial Data Schedule


___________________________
*Incorporated by reference