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 January 2, 1999

                                       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., 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 9, 1999 of outstanding shares of Common Stock
other than shares held by officers, directors and their respective associates:
$23,271,616

Number of shares outstanding at March 9, 1999:  3,496,494

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None


<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". Reference to a particular year or the
captions "For the Year" and "At Year End" refer to the fiscal periods as
follows:

                   1998  -  52 weeks ended January 2, 1999
                   1997  -  53 weeks ended January 3, 1998
                   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

                                     PART I
                                     ------
Item 1.  Business.

         The Company is engaged in the design, manufacture and sale of window
coverings, bedspreads, furniture and complementary products. These products are
sold to original equipment manufacturers of recreational vehicles and
manufactured housing and to the hospitality industry (motels/hotels) either
through distributors or directly to the customers.

         The Company has one industry segment and one class of products. The
business in which the Company is engaged is very competitive, and the Company
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 1998, two customers, Fleetwood Enterprises and Champion
Enterprises, accounted for approximately 20% and 14% respectively of the
Company's total sales. In the event of the loss of one or both of these
customers, there would be a material adverse effect on the Company. Fleetwood
operates in the manufactured housing and recreational vehicle industries,
whereas Champion operates solely in manufactured housing. Purchasing decisions
are made at each individual plant of these customers. The Company services many
of these plants and considers each of the plants it services 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 largely fabrics made
from both natural and man-made fibers. The raw materials are obtained primarily
from converters and mills. The Company is not dependent upon one or a very few
suppliers. Most of its suppliers are large firms with whom, in the opinion of
management, the Company enjoys good relationships. The Company has never
experienced any significant shortage in its supply of raw materials.

         The Company has no significant patents, licenses, franchises or
concessions. It owns certain trademarks and copyrights. Although the Company
believes the trademarks aid in identifying its products, it is unable to
evaluate the importance of the trademarks to its business. Expenditures for
research and development during 1998 and 1997 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 700 sales, production, warehouse and
administrative employees and also uses the services of independent sales
representatives.

                                       1
<PAGE>

Item 2.  Properties.

         The following table summarizes certain information concerning the
Company's properties:

<TABLE>
<CAPTION>

                                                                                       Approx.
            Location                                Principal Use                    Square Feet      Owned/Leased
            --------                                -------------                    -----------      ------------
<S>                                <C>                                                  <C>              <C>            
Haleyville, Alabama                Offices, manufacturing and warehouse                 54,000            Owned
Lakeland, Florida                  Offices, manufacturing and warehouse                  7,500           Leased
Pembroke Pines, Florida            Offices                                               3,148           Leased
Eatonton, Georgia                  Offices, manufacturing and warehouse                  5,000           Leased
Elkhart, Indiana                   Offices, manufacturing and warehouse                 16,000           Leased
Elkhart, Indiana                   Offices, manufacturing and warehouse                 35,000           Leased
Goshen, Indiana                    Offices, manufacturing and warehouse                 55,700            Owned
Bossier, Louisiana                 Offices, manufacturing and warehouse                 20,000            Owned
Salisbury, North Carolina          Offices, manufacturing and warehouse                 22,500           Leased
Berwick, Pennsylvania              Warehouse                                             5,000           Leased
Bloomsburg, Pennsylvania           Offices, manufacturing and warehouse                 56,500            Owned
Memphis, Tennessee                 Offices, manufacturing and warehouse                 14,000           Leased
Abbotsford, Wisconsin              Offices, manufacturing and warehouse                 21,600           Leased

</TABLE>


         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.

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 have been adjusted for stock splits.

<TABLE>
<CAPTION>

                                        1998 Sales Prices                             1997 Sales Prices
                                        -----------------                             -----------------
                                  High                    Low                    High                    Low
                                  ----                    ---                    ----                    ---
<S>                               <C>                     <C>                    <C>                     <C>
First Quarter                      8-7/8                  7-3/16                  7-7/8                  6-13/16
Second Quarter                    11-3/16                 8-1/8                   7-11/16                7-1/8
Third Quarter                     11-3/4                  7-3/8                   8-13/16                7-1/8
Fourth Quarter                     8-5/8                  6-3/4                   8-1/8                  7-1/8

</TABLE>


         As of March 9, 1999, the Company had 407 shareholders of record of its
Common Stock.

         Total cash dividend payments were $.28 per share in 1998 and 1997.


                                        2

<PAGE>
<TABLE>
<CAPTION>
                                              DECORATOR INDUSTRIES, INC.

                                           Item 6. Selected Financial Data

                                                          1998                1997                1996            
                                                          ----                ----                ----            
<S>                                                       <C>                 <C>                 <C>
FOR THE YEAR
------------
    Net Sales                                        $ 51,966,829        $ 43,395,923        $ 38,649,687     
    Income from Continuing Operations                $  3,080,895        $  3,035,257        $  3,065,220     
    Net Income                                       $  3,080,895        $  2,898,339        $  3,065,220     
                                                  ---------------------------------------------------------
AT YEAR-END
-----------
    Total Assets                                     $ 21,462,694        $ 20,301,268        $ 18,394,357     
    Long-term Obligations                            $    463,037        $    506,169        $    549,433     
    Long-term Debt/Total Capitalization                     3.45%               3.71%               4.03%     
    Working Capital                                  $  8,244,161        $  8,406,250        $  9,003,836     
    Working Capital Ratio                                  2.59:1              2.61:1              2.94:1     
    Stockholders' Equity                             $ 15,559,732        $ 14,347,297        $ 13,010,945     
                                                  ---------------------------------------------------------
PER SHARE
---------
    Continuing Operations                                   $0.85               $0.82               $0.84     
    Basic                                                   $0.85               $0.78               $0.84     
    Diluted                                                 $0.79               $0.73               $0.78     
    Book Value                                              $4.37               $3.94               $3.52     
    Cash Dividends Declared                                 $0.28               $0.28               $0.28     



                                                          1995                1994                1993
                                                          ----                ----                ----
FOR THE YEAR
------------
    Net Sales                                         $ 34,207,259       $ 33,246,590        $ 28,964,223
    Income from Continuing Operations                 $  2,414,678       $  2,823,770        $  2,370,232
    Net Income                                        $  2,414,678       $  2,823,770        $  2,370,232
                                                  ---------------------------------------------------------
AT YEAR-END
-----------
    Total Assets                                      $ 16,415,659       $ 16,406,670        $ 13,188,452
    Long-term Obligations                             $    587,084       $    629,450        $    431,260
    Long-term Debt/Total Capitalization                      5.14%              5.30%               4.70%
    Working Capital                                   $  6,925,352       $  7,479,176        $  5,322,279
    Working Capital Ratio                                   2.54:1             2.75:1              2.39:1
    Stockholders' Equity                              $ 11,147,754       $ 11,322,046        $  8,741,511
                                                  ---------------------------------------------------------
PER SHARE
---------
    Continuing Operations                                    $0.60              $0.69               $0.60
    Basic                                                    $0.60              $0.69               $0.60
    Diluted                                                  $0.55              $0.62               $0.53
    Book Value                                               $2.99              $2.71               $2.20
    Cash Dividends Declared                                  $0.27              $0.23               $0.15
</TABLE>

Note:    Per share amounts, except for cash dividends, have been adjusted for
         five-for-four stock splits effective July 21, 1998 and June 13, 1997, a
         four-for-three stock split in June 1996 and a two-for-one stock split
         in April 1993.

                                        3


<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 January 2, 1999 was $8,244,161 compared to
         $8,406,250 at January 3, 1998.

2)       The current ratio was 2.59:1 at year-end 1998 compared to 2.61:1 at
         year-end 1997.

3)       The liquid ratio changed from 1.73:1 at year-end 1997 to 1.49:1 at
         year-end 1998.

4)       The long-term debt ratio continued to be minimal, at 3.45% January 2,
         1999 compared to 3.71% a year earlier.

         A significant use of working capital was made for purchases of Common
Stock to be held for the treasury ($1,044,240).

         Accounts receivable increased $203,932 (6%) and inventories increased
$1,146,845 (25%). The percentage increase in inventories was somewhat higher
than the 20% increase in net sales.

         Capital expenditures for 1998 were $1,166,032 which included
approximately $494,000 for land and facility additions. In February 1999, the
construction of a new building in Goshen, Indiana was completed at a cost of
approximately $1,240,000. This building replaced a leased facility. During 1999,
the Company was awarded an industrial revenue bond in the amount of $1,500,000,
the net proceeds of which will be used for the funding of this building and the
purchase of equipment at this location.

         Management does not foresee any events which will adversely affect its
liquidity during 1999, and, further, the Company's financial condition is more
than adequate to finance internal growth and any additional acquisitions of
businesses.

Year 2000 Issues

         The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any computer
programs that have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failure or
miscalculations causing disruptions in operations, including, among other
things, a temporary inability to process transactions, generate invoices, or
engage in similar normal business activities.

         Based on management's assessment, the Company determined that it would
be required to modify or replace portions of its software and hardware so that
its computer systems will properly recognize dates beyond December 31, 1999. The
majority of the Company's manufacturing processes are not dependent on
computers. The Company presently believes that with modification or replacement
of software and hardware, the Year 2000 issue can be mitigated. If such
modifications and replacements are not made, or are not completed timely, the
Year 2000 issue would not have a material adverse effect on the Company. The
Company has created no formal contingency plans in the event that the Year 2000
readiness is not completed on schedule. However, the Company believes that this
would cause only minor problems and delays.


                                        4
<PAGE>
         The Company plans to complete the Year 2000 project during the third
quarter of fiscal 1999. The total cost incurred to date related to the Year 2000
project, which have been charged to expense, have not been material, and the
Company does not anticipate that the expected remaining costs will be material.

         The Company has initiated formal communications with all of its
significant suppliers and large customers to determine the extent to which the
Company is vulnerable to those third parties' failure to remedy their own Year
2000 issues. Failure on the part of these entities to timely remediate their
Year 2000 issues could result in disruptions in the Company's supply of
materials, disruptions in its customers' ability to conduct business and
interruptions to the Company's daily operations. Management believes that its
exposure to third party risk is minimal because it does not rely significantly
on any one supplier or customer. There can be no guarantee, however, that the
systems of other unrelated entities on which the Company's systems and
operations rely will be corrected on a timely basis and will not have a material
adverse effect on the Company.

Results of Operations:

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

                                             1998         1997         1996
                                             ----         ----         ----
Net sales...............................    100.0%       100.0%       100.0%
Cost of products sold...................     78.0         75.4         74.1
Selling and administrative expenses.....     13.1         14.5         14.5
Interest and investment income..........      (.4)         (.8)         (.8)
Interest expense........................        -           .1           .1
Income from continuing operations.......      5.9          7.0          7.9
Net income..............................      5.9          6.7          7.9

1998 vs. 1997

Net sales for the year 1998 were $51,966,829, an increase of 20% compared to the
1997 sales of $43,395,923. The increase in sales dollars came from both the
businesses acquired in 1997 (46% of the increase) and the older businesses (54%
of the increase). Most of the increased sales were to recreational vehicle
manufacturers.

Cost of goods sold as a percentage of sales increased to 78.0% in 1998 from
75.4% in 1997. This increase is largely attributable to (1) a change in the
product mix including the increased sales to recreational vehicle manufacturers
and (2) productivity issues resulting in excessive labor costs and (3) market
conditions which have resulted in a lowering of operating margins.

Selling and administrative expenses as a percentage of sales decreased
significantly in 1998 to 13.1% from 14.5% in 1997. This decrease is a result of
fixed costs being spread over increased sales.

Interest and investment income decreased by $150,000 in 1998 because investable
balances were lower in 1998 than in 1997 and the market downturn caused the
Company to recognize a market loss of $32,000 in 1998 versus a market gain of
$71,000 in 1997.

The provision for income taxes as a percentage of pre-tax income increased
slightly to 35.8% compared to 35.1% in 1997.


                                        5
<PAGE>

1997 vs. 1996

         For the fiscal year 1997, net sales were $43,395,923 compared with
$38,649,687 in fiscal 1996. This represents an increase of 12% and was
attributable to the acquisitions made in 1997. Net sales to the manufactured
housing market were $18,732,000 in 1997 compared with $21,533,000 in 1996. This
decrease was largely due to the reduction in the number of manufactured homes
produced by the original equipment manufacturers. Net sales to the recreational
vehicle market were $15,306,000 in 1997 compared with $8,696,000 the prior year.
This increase results from the acquisitions made in 1997 and from the continued
growth of the existing businesses. Net sales to the hospitality market were
$9,375,000 in 1997 compared to $8,417,000 in 1996. This increase was due largely
to the acquisitions made in 1997.

         Cost of products sold as a percentage of sales increased to 75.4% in
1997 as compared to 74.1% in 1996. The increase was attributable to the higher
cost of products sold for acquired businesses, higher expenses associated with
the growth of existing businesses and market conditions which have resulted in a
lowering of operating margins.

         Selling and administrative expenses were $6,303,975 (14.5% of sales) in
1997 versus $5,611,222 (14.5% of sales) in 1996. This increase was from selling
and administrative expenses of the acquired businesses.

         For the fiscal year 1997, income from continuing operations was
$3,035,257, almost equal to the record earnings of $3,065,220 reported in the
prior year. The decline in net income ($166,881) was primarily due to the
decision to discontinue the manufacturing and sale of products for the retail
market, which resulted in a net loss of $136,918 for discontinued operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

         Not applicable.

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.

                                       6

<PAGE>
                                                      
                                    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 62, 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 S. Baxley, age 42, has been Executive Vice President of the
Company since January 1999. He was employed as Executive Vice President for the
Apparel Group of Scovill Fasteners, Inc., a manufacturer of apparel and
industrial fasteners, from February 1997 to July 1998. Previously he was in
various management positions with ACD Tridon, a subsidiary of Devtek (Automotive
products), Johnston & Murphy, a division of Genesco (Footwear), Fruit of the
Loom (Apparel), Procter & Gamble (Consumer Products) and the U.S. Navy.

         Michael K. Solomon, age 49, 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.

         William A. Johnson, age 39, was appointed an officer of the Company on
June 12, 1998. He has been Controller since January 6, 1997. From 1993 until
1996, he held various financial positions with Security Management Corporation.
Previously he served as Treasurer of National Family Services Association from
1991 to 1992.

         Jerome B. Lieber, age 78, 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.

         Joseph N. Ellis, age 70, 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 industry, 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 63, has been a director of the Company since
1995. He has been Vice Chairman of the Board of NationsBank N.A. (South) since
1996 and previously served as Chairman of the Board and Chief Executive Officer
of Intercontinental Bank. Mr. Allen is also a director of American Bankers
Insurance Group and Winsloew Furniture, Inc.

         Ellen Downey, age 46, has been a director of the Company since 1997.
She was employed by Ryder System, Inc. in various financial positions from 1978
to 1991 and from 1991 to 1993 served as Vice President and Treasurer of that
company.

         Thomas L. Dusthimer, age 64, has been a director of the Company since
1997. Since 1992 he has served as a consultant to and director of Key Bank
(Elkhart, Indiana District). From 1973 until his retirement in 1992, Mr.
Dusthimer served in various executive positions, including President, Chief
Executive Officer and Chairman, with Ameritrust Indiana Corporation and
Ameritrust National Bank.

                                        7

<PAGE>
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.
<TABLE>
<CAPTION>


                                              SUMMARY COMPENSATION TABLE

                                                                                      Long-Term
                                                                                    Compensation
                                                   Annual Compensation                 Awards
                                         ---------------------------------------       ------
Name and                         Fiscal                                               Optioned        All Other Com-
Principal Position                Year   Salary($)(1)    Bonus($)    Other($)(2)      Shares(#)      pensation($)(3)
------------------                ----   ------------    --------    -----------      ---------      ---------------
<S>                               <C>       <C>           <C>          <C>             <C>                <C>   
William A. Bassett(4)             1998      262,000       127,000      89,977           31,250            36,745
Chairman of the Board,            1997      249,712       123,000      87,723               --            34,745 
President and Chief Executive     1996      236,156       156,000         *             52,083(5)         34,745 
Officer                          
                                 
                                 

Michael K. Solomon                1998      114,650        24,000         *             12,500               447
Vice President, Treasurer and     1997      112,370        25,550         *                 --                --    
Chief Financial Officer           1996      107,000        28,940      27,106           20,832(5)             --    
                                  
                                  
</TABLE>
------------------------
(1)      The fiscal year 1997 was a 53-week fiscal period.
(2)      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 1998 and 1997, payments
         to Mr. Bassett for such sales were $86,106 and $84,289, respectively.
         These payments provided net benefits to the company of $16,359 for 1998
         and $16,383 for 1997. For 1996, payment to Mr. Solomon for such sales
         was $18,059, which provided a net benefit to the Company of $11,919. An
         asterisk indicates that the total of other annual compensation for that
         year was less than 10% of salary and bonus for that year.
(3)      Premiums paid by the Company on life and long-term disability insurance
         policies and Company contributions to the 401(k) Retirement Savings
         Plan.
(4)      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.
(5)      As adjusted for the four-for-three  stock split in June 1996 and 
         five-for-four  stock splits in June 1997 and July 1998.

         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.

         On September 1, 1998 the Company began a 401(k) Retirement Savings Plan
available to all eligible employees. To be eligible for the plan, the employee
must be at least 21 years of age and have completed one year of employment.
Eligible employees may contribute up to 15% of their earnings with a maximum of
$10,000 for 1998 based on the Internal Revenue Service annual contribution
limit. The Company will match 25% of the first 4% of the employee's
contributions up to 1% of the employee's earnings. Contributions are invested at
the direction of the employee in one or more funds. Company contributions begin
to vest after three years.

                                       8

<PAGE>

         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
804,976 shares (as adjusted for stock splits) of the Company's Common Stock. The
purchase price of optioned shares was 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 options is 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 520,830 shares (as adjusted for stock splits) 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 that 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.

         The following table sets forth information concerning the exercise of
stock options during fiscal 1998 by the named executive officers and the value
of their unexercised, in-the-money stock options at the end of that fiscal year
(January 2, 1999). All options outstanding at January 2, 1999, except for those
granted after fiscal 1995, were exercisable at any time prior to their
respective expiration dates.

<TABLE>
<CAPTION>
                                   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                                          AND FISCAL YEAR-END OPTION VALUES

                                                   Shares                            Optioned          Value of
                                                  Acquired           Value           Shares at        Options at
Name                                             on Exercise       Realized ($)     01/02/99 (#)     01/02/99($)(1)
----                                             -----------       ------------     ------------     --------------
<S>                                                 <C>              <C>             <C>                 <C>    
William A. Bassett                                  25,000           198,245         147,913(3)          765,481
                                                                                      35,416(4)           32,029
Michael K. Solomon                                  10,000(2)         70,300          50,828(3)          241,364
                                                                                      14,166(4)           12,812

</TABLE>
--------------------------  
(1)      Assumes a market value of $7.875 per share, which was the last reported
         sale price on the American Stock Exchange on December 31, 1998.
(2)      As adjusted for the five-for-four stock split in July 1998.
(3)      Exercisable.
(4)      Unexercisable.

Compensation of Directors

         Directors who are not employees of the Company are paid a fee of
$10,000 per year for their services as directors. The fee is paid quarterly in
shares of the Company's Common Stock valued at their closing price on the
American Stock Exchange on the third business day following the release of sales
and earnings for the preceding fiscal year. Under the Company's Stock Plan for
Non-Employee Directors, such directors may elect to defer receipt of their
shares, until after they leave the Board, by having them delivered to the Trust
established under the Plan.

                                        9


<PAGE>
Item 12.  Security Ownership of Certain Beneficial Owners and Management.

         Information concerning the common stockholding at March 9, 1999 of the
directors and named executive officers of the Company, and 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.
<TABLE>
<CAPTION>
Name or Group                                  Shares Beneficially Owned                Percent of Class (1)
-------------                                  -------------------------                --------------------
<S>                                                   <C>                                       <C>  
William A. Bassett                                    357,071(2)                                9.81%
Michael K. Solomon                                     96,267(3)                                2.72%
Jerome B. Lieber                                       13,705(4)(5)                               -- 
Joseph N. Ellis                                         2,500(5)                                  -- 
William H. Allen, Jr.                                   5,000(5)                                  -- 
Ellen Downey                                            1,562(5)                                  -- 
Thomas L. Dusthimer                                     1,250(5)                                  -- 
All directors and executive officers
as a group                                            477,356(6)                               12.95%

</TABLE>
----------------------------
(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 147,913 optioned shares which may be acquired within 60 days
         and 11,216 shares held as Trustee of the trust established under the
         Company's Stock Plan for Non-Employee Directors (the "Trust"). Mr.
         Bassett disclaims beneficial ownership of the shares he holds as
         Trustee.
(3)      Includes 42,828 optioned shares, which may be acquired within 60 days.
(4)      Includes 5,040 shares held in a charitable trust as to which Mr. Lieber
         disclaims beneficial ownership.
(5)      Excludes shares held in the Trust for his or her account.
(6)      Includes 190,740 optioned shares, which may be acquired within 60 days.

         FMR Corp. of Boston, Massachusetts, has furnished the Company a copy of
its Schedule 13G dated February 1, 1999 in which it reported that as of December
31, 1998 Fidelity Management & Research Company, a wholly-owned subsidiary of
FMR Corp. and a registered investment adviser, had sole investment power with
respect to 377,915 shares (10.81%) of the Company's Common Stock.

         First Manhattan Co. of New York, New York has furnished the Company a
copy of its Schedule 13G dated February 11, 1999 in which it reported beneficial
ownership of a total of 252,570 shares (7.22%) of the Company's Common Stock
including sole power to vote and dispose of 7,812 shares, shared power to vote
237,462 shares and shared power to dispose of 244,758 shares. First Manhattan is
a registered broker-dealer and investment adviser.

         Heartland Advisors, Inc. of Milwaukee, Wisconsin, a registered
investment adviser, has furnished the Company a copy of its Schedule 13G dated
January 13, 1999 in which it reported that it had sole dispositive power with
respect to 312,500 shares (8.94%) of the Company's Common Stock.

Item 13.  Certain Relationships and Related Transactions.

         In November 1998, the Company bought 25,000 shares of the Company's
Common Stock from the President, William A. Bassett, for $212,500 to aid Mr.
Bassett in the payment of taxes resulting from the exercise of stock options.

                                       10

<PAGE>
                                     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) Independent Auditors' Report

         (2) Balance Sheets - January 2, 1999 and January 3,1998

         (3) Statements of Earnings for the three fiscal years ended January 2,
             1999

         (4) Statements of Stockholders' Equity for the three fiscal years ended
             January 2, 1999

         (5) Statements of Cash Flows for the three fiscal years ended January
             2, 1999

         (6) Notes to the Financial Statements

         (7) Report of Independent Auditors' Report 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.

         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, 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.

                                       11

<PAGE>

         10H.2    Lease Modification Agreement dated September 30, 1996
                  regarding Exhibit 10H, filed as Exhibit 10H.2 to Form 10-K for
                  the fiscal year ended December 28, 1996 and incorporated
                  herein by reference.

         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 as
                  Exhibit 10V to Form 10-K for the fiscal year ended December
                  28, 1996, and incorporated herein by reference.

         10W      Stock Plan for Non-employee Directors and related Grantor
                  Trust Agreement, filed as Exhibit 10W to Form 10-Q for the
                  quarter ended June 28, 1997 and incorporated herein by
                  reference.*

         11N      Computation of diluted income per share, filed herewith.

         24F      Consent of Independent Auditors, filed herewith.

         27H      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 1998.


                                       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 24, 1999

         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 24, 1999
                            Chief Executive Officer and    ---------------------------
                            Director

Michael K. Solomon          Vice President, Treasurer,     /s/ Michael K. Solomon                 March 24, 1999
                            Principal Financial and        ---------------------------
                            Accounting Officer,
                            And Director

Jerome B. Lieber            Director                       /s/ Jerome B. Lieber                   March 24, 1999
                                                           ---------------------------

Joseph N. Ellis             Director                       /s/ Joseph N. Ellis                    March 24, 1999
                                                           ---------------------------

William H. Allen, Jr.       Director                       /s/ William H. Allen, Jr.              March 24, 1999
                                                           ---------------------------

Ellen Downey                Director                       /s/ Ellen Downey                       March 24, 1999
                                                           ---------------------------

Thomas Dusthimer            Director                       /s/ Thomas Dusthimer                   March 24, 1999
                                                           ---------------------------
</TABLE>
                                       13

<PAGE>

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

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

         We have audited the accompanying balance sheets of Decorator
Industries, Inc. as of January 2, 1999 and January 3, 1998 and the related
statements of earnings, stockholders' equity and cash flows for each of the
three fiscal years in the period ended January 2, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial position of Decorator
Industries, Inc. as of January 2, 1999 and January 3, 1998, and the results of
its operations and its cash flows for each of the three fiscal years in the
period ended January 2, 1999 in conformity with generally accepted accounting
principles.

                                       LOUIS PLUNG & COMPANY, LLP
                                       Certified Public Accountants




Pittsburgh, Pennsylvania
February 20, 1999  (March 24, 1999 as to Note 7)


                                       F-1


<PAGE>
                           DECORATOR INDUSTRIES, INC.
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                     Fiscal Year End
                                 ASSETS                                         1998                   1997         
                                 ------                                         ----                   ----
<S>                                                                          <C>                    <C>
Current Assets:
    Cash and Cash Equivalents                                                $ 2,633,999            $ 3,157,861
    Short-term Investments                                                       861,032              2,006,882
    Accounts Receivable, less allowance for
        doubtful accounts ($111,706 and $218,018)                              3,847,435              3,643,503
    Inventories                                                                5,725,226              4,578,381
    Other Current Assets                                                         349,394                256,425
                                                                             -----------            -----------
Total Current Assets                                                          13,417,086             13,643,052
                                                                             -----------            -----------

Property and Equipment:
    Land, Buildings & Improvements                                             2,676,183              2,182,228
    Machinery, Equipment, Furniture and Fixtures                               4,124,579              3,500,122
                                                                             -----------            -----------
Total Property and Equipment                                                   6,800,762              5,682,350
    Less:  Accumulated Depreciation and Amortization                           2,635,683              2,208,956
                                                                             -----------            -----------
Net Property and Equipment                                                     4,165,079              3,473,394     
                                                                             -----------            -----------
Goodwill, less accumulated
    Amortization of $1,070,336 and $963,466                                    3,288,582              3,010,422
Other Assets                                                                     591,947                174,400
                                                                             -----------            -----------
Total Assets                                                                 $21,462,694            $20,301,268     
                                                                             ===========            ===========


                   LIABILITIES & STOCKHOLDERS' EQUITY
                   ----------------------------------
Current Liabilities:
    Accounts Payable                                                         $ 2,869,889            $ 3,114,661
    Current Maturities of Long-term Debt                                          43,133                 42,423
    Accrued Expenses:
        Compensation                                                           1,373,572              1,323,276
        Other                                                                    886,331                756,442
                                                                             -----------            -----------
Total Current Liabilities                                                      5,172,925              5,236,802
                                                                             -----------            -----------     
Long-Term Debt                                                                   463,037                506,169
Deferred Income Taxes                                                            267,000                211,000
                                                                             -----------            -----------
Total Liabilities                                                              5,902,962              5,953,971
                                                                             -----------            -----------     
Stockholders' Equity
    Common stock $.20 par value: Authorized shares, 10,000,000;
       Issued shares, 4,373,916 and 3,463,840                                    874,784                692,794
    Paid-in Capital                                                            1,396,137              1,513,280
    Retained Earnings                                                         16,756,377             14,588,269
                                                                             -----------            -----------
                                                                              19,027,298             16,794,343
    Less:  Treasury stock, at cost:  812,500 and 554,100 shares                3,467,566              2,447,046
                                                                             -----------            -----------
Total Stockholders' Equity                                                    15,559,732             14,347,297
                                                                             -----------            -----------
Total Liabilities and Stockholders' Equity                                   $21,462,694            $20,301,268
                                                                             ===========            ===========
</TABLE>
               The accompanying notes are an integral part of the
                             financial statements.

                                       F-2

<PAGE>
                                              DECORATOR INDUSTRIES, INC.
                                                STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>


                                                                             For the Fiscal Year
                                                                             -------------------
                                                               1998                  1997                   1996
                                                               ----                  ----                   ----
<S>                                                           <C>                   <C>                   <C>        
Net Sales                                                     $51,966,829           $43,395,923           $38,649,687
Cost of Products Sold                                          40,546,325            32,736,117            28,626,094
                                                              -----------           -----------           -----------
Gross Profit                                                   11,420,504            10,659,806            10,023,593
Selling and Administrative Expenses                             6,806,968             6,303,975             5,611,222
                                                              -----------           -----------           -----------
Operating Income                                                4,613,536             4,355,831             4,412,371
Other Income (Expense):
    Interest and Investment Income                                194,456               344,559               305,370
    Interest Expense                                               (9,097)              (24,133)              (38,521)
                                                              -----------           -----------           -----------
Earnings Before Income Taxes                                    4,798,895             4,676,257             4,679,220
Provision for Income Taxes                                      1,718,000             1,641,000             1,614,000
                                                              -----------           -----------           -----------
Income from Continuing Operations                               3,080,895             3,035,257             3,065,220
Loss on Discontinued Operations, less                                                                                
    applicable income tax of $83,000                                   --              (136,918)                   --
                                                              -----------           -----------           -----------
Net Income                                                     $3,080,895            $2,898,339            $3,065,220
                                                              ===========           ===========           ===========

Earnings Per Share:
    Continuing Operations                                           $0.85               $0.82 *               $0.84 *
                                                                    =====               =====                 =====
    Basic                                                           $0.85               $0.78 *               $0.84 *
                                                                    =====               =====                 =====
    Diluted                                                         $0.79               $0.73 *               $0.78 *
                                                                    =====               =====                 =====

Average Number of Shares Outstanding:
    Basic                                                       3,631,457           3,714,838 *           3,646,830 *
    Diluted                                                     3,880,619           3,968,380 *           3,924,390 *

</TABLE>

*  Restated to reflect the five-for-four stock splits effective July 21, 1998
   and June 13, 1997 and the four-for-three stock split effective June 17, 1996.

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

                                       F-3


<PAGE>
<TABLE>
<CAPTION>
                                              DECORATOR INDUSTRIES, INC.
                                          STATEMENTS OF STOCKHOLDERS' EQUITY

                                          COMMON            PAID-IN            RETAINED            TREASURY
                                          STOCK             CAPITAL            EARNINGS              STOCK               TOTAL
                                          -----             -------            --------              -----               -----
<S>                                     <C>               <C>                <C>                <C>                  <C>    
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             148,890                                                     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                                      (312,923)         (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

Transactions for 1997
    Net profit                                                                 2,898,339                               2,898,339

    Issuance of stock for
    exercise of options                    9,273              61,356                                                      70,629

    Issuance of stock for
    directors compensation                                    19,330                                   15,539             34,869

    Stock option tax
    benefit                                                   26,000                                                      26,000

    Purchase of common
    stock for treasury                                                                               (903,659)          (903,659)

    Dividends paid                                                              (788,694)                               (788,694)

    Record stock split                   138,426            (139,558)                                                     (1,132)
                                 ---------------    ----------------   -----------------    -----------------  ----------------- 
Balance at
January 3, 1998                         $692,794          $1,513,280         $14,588,269          $(2,447,046)       $14,347,297

Transactions for 1998
    Net profit                                                                 3,080,895                               3,080,895

    Issuance of stock for
    exercise of options                    7,138              14,731                                                      21,869

    Issuance of stock for
    directors compensation                                    28,377                                   23,720             52,097

    Stock option tax
    benefit                                                   16,350                                                      16,350

    Purchase of common
    stock for treasury                                                                             (1,044,240)        (1,044,240)

    Dividends paid                                                              (912,787)                               (912,787)

    Record stock split                   174,852            (176,601)                                                     (1,749)
                                 ---------------    ----------------   -----------------    -----------------  ----------------- 
Balance at
January 2, 1999                         $874,784          $1,396,137         $16,756,377          $(3,467,566)       $15,559,732
                                 ===============    ================   =================    =================  ================= 
</TABLE>
               The accompanying notes are an integral part of the
                             financial statements.
                                    F-4
<PAGE>
<TABLE>
<CAPTION>
                                              DECORATOR INDUSTRIES, INC.
                                               STATEMENTS OF CASH FLOWS

                                                                                      For the Fiscal Year
                                                                                      -------------------
                                                                         1998                1997                  1996
                                                                         ----                ----                  ----
<S>                                                                      <C>                 <C>                  <C>       
Cash Flows From Operating Activities:
    Net Income                                                           $3,080,895          $2,898,339           $3,065,220
    Adjustments to Reconcile Net Income to Net Cash
    Provided by Operating Activities:
        Depreciation and Amortization                                       569,681             517,258              412,172
        Provision for Losses on Accounts Receivable                          68,471              (4,000)              40,000
        Deferred Taxes                                                       41,000              72,000               43,000
        (Gain) Loss on Disposal of Assets                                    (5,206)              6,849                 (264)
    Increase (Decrease) from Changes in:
        Accounts Receivable                                                (272,403)             25,210            (236,533)
        Inventory                                                        (1,146,845)           (951,927)             (77,621)
        Prepaid Expenses                                                   (137,969)             20,844                9,104
        Other Assets                                                       (417,547)            (33,808)             153,981
        Accounts Payable                                                   (244,772)            490,109             (126,777)
        Accrued Expenses                                                    180,185             106,977              259,280
                                                                   -----------------    ----------------      ---------------
Net Cash Provided by Operating Activities                                 1,715,490           3,147,851            3,541,562
                                                                   -----------------    ----------------      ---------------

Cash Flows From Investing Activities:
    Capital Expenditures                                                 (1,166,032)           (537,555)            (418,557)
    Proceeds from Property Dispositions                                      16,742             125,827                5,609
    Short-term Investments                                                1,145,850             532,731           (2,525,006)
    Note Receivable                                                          60,000              80,000               80,000
    Net Cash Paid for Acquisitions                                               --          (3,300,096)                  --
    Deferred Purchase Price Payments                                       (385,030)                 --                   --
                                                                   -----------------    ----------------      ---------------
Net Cash Used in Investing Activities                                      (328,470)         (3,099,093)          (2,857,954)
                                                                   -----------------    ----------------      ---------------

Cash Flows From Financing Activities:
    Long-term Debt Payments                                                 (42,422)            (43,264)             (36,997)
    Dividend Payments                                                      (912,787)           (788,694)            (613,922)
    Proceeds from Exercise of Stock Options                                  21,869              70,627              165,012
    Cash in Lieu of Fractional Shares                                        (1,749)             (1,132)              (1,288)
    Issuance of Stock for Director's Compensation                            52,097              34,869                   --
    Stock Option Tax Benefit                                                 16,350              26,000               18,000
    Purchase of Common Stock for Treasury                                (1,044,240)           (903,659)            (769,829)
                                                                   -----------------    ----------------      ---------------
Net Cash Used in Financing Activities                                    (1,910,882)         (1,605,253)          (1,239,024)
Net Increase (Decrease) in Cash and Cash Equivalents                       (523,862)         (1,556,495)            (555,416)
Cash and Cash Equivalents at Beginning of Year                            3,157,861           4,714,356            5,269,772
                                                                   =================    ================      ===============
Cash and Cash Equivalents at End of Period                               $2,633,999          $3,157,861           $4,714,356
                                                                   =================    ================      ===============

Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
    Interest                                                                $25,630             $26,893              $29,393
    Income Taxes                                                         $1,794,790          $1,534,242           $1,568,476
</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
         ------------------------------------------

         Nature of Operations

         The Company is engaged in the design, manufacture and sale of window
         coverings, bedspreads, furniture and complementary products. These
         products are sold to original equipment manufacturers of recreational
         vehicles and manufactured housing and to the hospitality industry
         (motels/hotels) either through distributors or directly to the
         customers.

         The Company has one industry segment and one class of products. The
         business in which the Company is engaged is very competitive, and the
         Company 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.

         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 year 1998 was a 52-week period ending January 2, 1999;
         1997 was a 53-week period ending January 3, 1998 and 1996 was a 52-week
         period ending December 28, 1996.

         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 acquisitions of Haleyville Manufacturing (1973), Liberia
         Manufacturing (1985), Paragon Interiors (1995), Specialty Windows
         (1997) and Southern Interiors (1997) are being amortized over a period
         of 40 years. Amortization of $106,870 was charged to income during
         fiscal year ended January 2, 1999, $89,242 in fiscal year ended January
         3, 1998, and $58,786 in fiscal year ended December 28, 1996.

                                       F-6

<PAGE>

                           DECORATOR INDUSTRIES, INC.
                          NOTES TO FINANCIAL STATEMENTS

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
         ------------------------------------------------------

         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.

         Reclassification
         ----------------

         Certain prior year amounts have been reclassified to conform to the
         current year presentation.

         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:
<TABLE>
<CAPTION>
                                                               1998                  1997
                                                               ----                  ----
<S>                                                              <C>                  <C>     
               General Funds                                     $33,363              $246,400
               Demand Notes                                    1,700,000             2,845,000
               Repurchase agreements                             900,636                66,461
                                                          ---------------       ---------------
                                                              $2,633,999            $3,157,861
                                                          ===============       ===============
</TABLE>
         The demand notes are guaranteed by letters-of-credit.

         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. A loss of $32,020 is included in income for the year ended
         January 2, 1999 compared to an unrealized gain of $70,969 for the year
         ended January 3, 1998.

         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.

         Credit Risk
         -----------

         The Company sells primarily on thirty day terms. 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 geographic area.

                                       F-7
<PAGE>

                           DECORATOR INDUSTRIES, INC.
                          NOTES TO FINANCIAL STATEMENTS

(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
         -----------------------------------------------------

         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 five-for-four stock split effective July 21,
         1998. Per share and share data have been adjusted to reflect this stock
         split.

         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. See note 11
         "Earnings Per Share" for computation of EPS.

         Stock Based Compensation
         ------------------------

         In accordance with the provisions of SFAS No. 123, the Company follows
         the intrinsic value based method of accounting as prescribed by APB 25,
         "Accounting for Stock Issued to Employees," for its stock-based
         compensation. Accordingly, no compensation cost is recognized.

         Segment Information
         -------------------

         The Company has one business segment, the interior furnishings
         business, and follows the requirements of SFAS No. 131, "Disclosures
         about Segments of an Enterprise and Related Information."

         Recent Accounting Developments
         ------------------------------

         The following Statements of Financial Accounting Standards (SFAS) were
         issued by the Financial Accounting Standards Board. These statements
         will have no effect on the Company.

         SFAS No. 132, "Employers' Disclosures about Pensions and Other
         Postretirement Benefits," was issued February 1998. The statement
         requires employers with one or more defined benefit plans or one or
         more defined post retirement plans to provide additional disclosures
         about these plans. This statement is effective for fiscal years
         beginning after December 15, 1997.

         SFAS No. 133, "Accounting for Derivative Instruments and Hedging
         Activities" was issued in June 1998. The statement requires derivatives
         to be recorded on the balance sheet as assets or liabilities, measured
         at fair value. Gains or losses resulting from changes in fair value of
         the derivatives are recorded depending upon whether the instruments
         meet the criterion for hedge accounting. This statement is effective
         for fiscal years beginning after June 15, 1999.

                                       F-8
<PAGE>

                           DECORATOR INDUSTRIES, INC.
                          NOTES TO FINANCIAL STATEMENTS

(2)      ACQUISITIONS AND DIVESTITURES 
         -----------------------------

         As of March 15, 1997, the Company acquired the business and certain
         assets of Specialty Window Coverings Corp. for $2,455,783 and future
         consideration, not to exceed $2 million, based on Specialty's earnings
         over the two years ending April 3, 1999. Specialty is an Elkhart,
         Indiana based manufacturer of pleated shades for the recreational
         vehicle market.

         As of May 12, 1997, the Company acquired the business and certain
         assets of Southern Interiors, Inc. for $844,313 and future
         consideration, not to exceed $500,000, based on Southern's sales over
         the three years ending July 1, 2000. Southern is located in Memphis,
         Tennessee and manufactures draperies for the hospitality market from
         fabric supplied by its customers, largely hotel design and supply
         firms.

         These acquisitions have been included in the consolidated financial
         statements from the dates of acquisition. They have been accounted for
         as a purchase. In each case, the purchase price has been allocated to
         the underlying assets based upon their estimated fair values at the
         date of acquisition. The excess of purchase price over the fair value
         of the net assets acquired ("goodwill") is $1,260,328 and $436,517
         respectively, which is being amortized over 40 years.

         In December 1997 the Company decided to discontinue the manufacturing
         and sale of products for the retail market. This resulted in an
         after-tax loss of $136,918 on net sales of $412,492.

         The cash payments for deferred purchase price of $385,030 represents
         the additional consideration paid for the acquisitions of Specialty
         Window Coverings and Southern Interiors. Additional consideration may
         be due Specialty after April 3, 1999 and Southern after July 1, 1999
         and July 1, 2000.

(3)      INVENTORIES
         -----------

         Inventories consisted of the following classifications:
<TABLE>
<CAPTION>
                                                                          1998                 1997
                                                                          ----                 ----
<S>                                                                      <C>                  <C>       
               Raw materials & supplies                                  $5,462,938           $4,343,132
               In process & finished goods                                  262,288              235,249
                                                                     ---------------      ---------------
                                                                         $5,725,226           $4,578,381
                                                                     ===============      ===============
</TABLE>

(4)      LEASES
         ------

         The Company leases certain buildings and equipment used in its
         operations. Building leases generally provide that the Company bears
         the cost of maintenance and repairs and other operating expenses. Rent
         expense was $478,635 in 1998, $361,558 in 1997 and $248,286 in 1996.

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

                                               1999              $399,266
                                               2000              $286,854
                                               2001              $158,820
                                               2002               $65,804
                                               2003               $51,804
                                         Thereafter              $146,778


                                       F-9
<PAGE>

                           DECORATOR INDUSTRIES, INC.
                          NOTES TO FINANCIAL STATEMENTS

(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 $296,750, $214,200 and
         $214,200, respectively, from 1999 through 2001 and $535,500 thereafter.

(6)      SIGNIFICANT CUSTOMERS
         ---------------------

         Sales to Fleetwood Enterprises accounted for 20.1%, 22.6% and 22.5% of
         Company sales in 1998, 1997 and 1996, respectively. Fleetwood operates
         in the manufactured housing and recreational vehicle industries. Sales
         to Champion Enterprises accounted for 13.5% and 14.2% of Company sales
         in 1998 and 1997 respectively. Champion operates solely in manufactured
         housing. Purchasing decisions are made at each individual plant of
         these customers. The Company services many of these plants and
         considers each of the plants it services to be an independent customer.

 (7)     LONG TERM-DEBT AND CREDIT ARRANGEMENTS
         --------------------------------------
<TABLE>
<CAPTION>

        Long-term debt consists of the following:
                                                                                      1998                1997
                                                                                      ----                ----
<S>                                                                                   <C>                 <C>     
        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.                                                                     $181,170            $198,592

        Bond payable in monthly installments through November 2008.  The
        interest rate is variable and is currently less than 4%.  This bond is
        secured by the Company's Bloomsburg, PA property.                              325,000             350,000
                                                                                   ------------       -------------
                                                                                       506,170             548,592
        Less amount due within one year                                                 43,133              42,423
                                                                                   ------------       -------------
                                                                                      $463,037            $506,169
                                                                                   ============       =============
</TABLE>

         On March 24, 1999 the Company closed on a bond to fund its new Goshen,
         Indiana facility. The principal payments on this bond and other
         long-term debt for the five years subsequent to January 2, 1999 are as
         follows:
                                            1999                       $ 88,133
                                            2000                       $103,871
                                            2001                       $104,640
                                            2002                       $105,440
                                            2003                       $126,273

(8)      EMPLOYEE BENEFIT PLANS
         ----------------------

         On September 1, 1998 the Company began a 401(k) Retirement Savings Plan
         available to all eligible employees. To be eligible for the plan, the
         employee must be at least 21 years of age and have completed 1 year of
         employment. Eligible employees may contribute up to 15% of their
         earnings with a maximum of $10,000 for 1998 based on the Internal
         Revenue Service annual contribution limit. The Company will match 25%
         of the first 4% of the employee's contributions up to 1% of each
         employee's earnings. Contributions are invested at the direction of the
         employee to one or more funds. Company contributions begin to vest
         after three years. Company contributions to the plan were $19,000 in
         1998.

                                      F-10
<PAGE>

                           DECORATOR INDUSTRIES, INC.
                          NOTES TO FINANCIAL STATEMENTS

(9)      STOCK OPTIONS
         -------------

         At January 2, 1999, 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 these plans consistent with the method of SFAS
         No. 123, the Company's net income and earning[s] per share would have
         been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>

                                                               1998                 1997               1996
                                                               ----                 ----               ----
<S>                                                         <C>                  <C>                <C>       
        Pro forma net income                                $3,026,032           $2,844,631         $3,007,470
        Pro forma earnings per share:
            Basic                                              $0.83               $0.77               $0.82
            Diluted                                            $0.78               $0.72               $0.77
</TABLE>
         During the initial phase-in period of SFAS No. 123 the pro forma
         disclosure may not be representative of the impact on the net income in
         future years.

         Under the 1984 Incentive Stock Option Plan, which expired in 1994, the
         Company granted options to its employees for 804,976 shares (as
         adjusted for stock splits). Under the 1995 Incentive Stock Option Plan,
         the company may grant options to its key employees for up to 520,830
         (as adjusted for stock splits) 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. Under the 1995 Incentive Stock Option Plan 260,410
         (as adjusted for stock splits) shares were granted in 1996, 7,813 (as
         adjusted for stock splits) shares were granted in 1997 and 168,750 (as
         adjusted for stock splits) shares were granted in 1998. The options
         granted in 1997 and 1996 vest 20% each year starting with the date of
         the grant. The options granted in 1998 vest 20% each year beginning at
         the end of the first year.

         The fair value of 1996 and 1997 option grants are estimated on the date
         of grant using the Flexible Binomial options-pricing method with the
         following weighted-average assumptions used for the grants in 1997 and
         1996: dividend yield of 3.6 percent for all years; expected volatility
         of 40.6 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. The 1998
         grant used the Black-Sholes options-pricing method with the following
         weighted-average assumptions: dividend yield of 2.6 percent; expected
         volatility of 47.7 percent; risk-free interest rate of 5.6 percent; and
         expected life of 5 years.

                                      F-11

<PAGE>

                           DECORATOR INDUSTRIES, INC.
                          NOTES TO FINANCIAL STATEMENTS

(9)      STOCK OPTIONS (Continued)
         ------------------------

         A summary of the status of the Company's outstanding stock options as
         of January 2, 1999, January 3, 1998 and December 28, 1996, and changes
         during the years ending on those dates is presented below:
<TABLE>
<CAPTION>

                                                        1998                     1997                     1996
                                                        ----                     ----                     ----
                                                            Exercise                 Exercise                 Exercise
                                               Shares(1)    Price(2)    Shares(1)    Price(2)    Shares(1)    Price(2)
                                               ---------    --------    ---------    --------    ---------    --------
<S>                                             <C>          <C>         <C>           <C>        <C>          <C>  
         Outstanding at beginning of year       424,124      $3.40       508,212       $3.09      404,615      $1.19
         Granted                                168,750      $8.10         7,813       $7.28      260,410      $4.80
         Exercised                              (38,367)     $0.57       (68,980)      $1.02     (156,813)     $1.05
         Forfeited                                   --         --       (22,921)      $4.82           --         --
                                              ---------               ----------                ---------     
         Outstanding at year-end                554,507      $5.03       424,124       $3.40      508,212      $3.09

         Options exercisable at year-end        285,242                  274,129                  299,884
         Weighted-average fair value of
         options granted during the year         $3.21                    $1.68                    $1.68
</TABLE>
         The following information applies to fixed stock options outstanding at
         January 2, 1999:
<TABLE>
<CAPTION>
<S>                                                                    <C>    
                  Number outstanding (1)                               554,507
                  Range of exercise prices                             $0.57 to $8.10
                  Weighted-average exercise price                      $5.03
                  Weighted-average remaining contractual life          8.7 years
</TABLE>
         -----------------------
(1)      As adjusted for the four-for-three stock split in June 1996 and the
         five-for-four stock splits in June 1997 and July 1998.
(2)      Based on the weighted-average exercise price.

(10)     INCOME TAXES
         ------------

         A summary of income taxes from continuing operations is as follows:
<TABLE>
<CAPTION>
                                                   1998                      1997                      1996
                                                   ----                      ----                      ----
<S>                                                   <C>                      <C>                       <C>       
        Current:
           Federal                                    $1,410,000               $1,322,000                $1,350,000
           State                                         275,000                  247,000                   221,000
        Deferred                                          33,000                   72,000                    43,000
                                           ----------------------    ---------------------     ---------------------
        Total                                         $1,718,000               $1,641,000                $1,614,000
                                           ======================    =====================     =====================

</TABLE>
                                      F-12
<PAGE>

                           DECORATOR INDUSTRIES, INC.
                          NOTES TO FINANCIAL STATEMENTS

(10)     INCOME TAXES (Continued)
         -----------------------

         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:
<TABLE>
<CAPTION>
                                                                                       1998              1997
                                                                                       ----              ----
<S>                                                                                   <C>               <C>     
        Property and equipment, due to differences in depreciation                    $241,000          $187,000
        Installment sale of land & building                                                 --            12,500
        Inventories, due to additional cost
            recorded for income tax purposes                                           (17,000)          (13,000)
        Accounts receivable, due to allowance
            for doubtful accounts                                                      (42,000)          (83,000)
        Accrued liabilities, due to expenses not yet
            deductible for income tax purposes                                         (18,000)           27,500
                                                                                ---------------    --------------

        Net deferred income tax liability                                             $164,000          $131,000
                                                                                ===============    ==============
</TABLE>
         The net deferred income tax liability is presented in the balance
         sheets as follows:

                                                      1998              1997
                                                      ----              ----
        Current Asset                                $103,000         $ 80,000
        Long-term Liability                           267,000          211,000

         The effective income tax rate varied from the statutory Federal tax
         rate as follows:
<TABLE>
<CAPTION>
                                                      1998              1997              1996
                                                      ----              ----              ----
<S>                                                   <C>               <C>               <C>  
        Federal statutory rate                        34.0%             34.0%             34.0%
        State income taxes, net of
            federal income tax benefit                 4.0               3.8               3.3
        Other                                         (2.2)             (2.7)             (2.8)
                                                      -----            -----             -----
        Effective income tax rate                     35.8%             35.1%             34.5%
                                                      =====             =====            =====
</TABLE>

 (11)    EARNINGS PER SHARE
         ------------------

         In accordance with SFAS No. 128, the following is a reconciliation of
         the numerators and denominators of the basic and diluted EPS
         computations.
<TABLE>
<CAPTION>
                                                             1998                  1997                  1996
                                                             ----                  ----                  ----
<S>                                                           <C>                   <C>                  <C>       
        Numerator:
            Net income                                        $3,080,895            $2,898,339           $3,065,220
                                                       ==================    ==================    =================
        Denominator:
            Weighted-average number of                                                                              
            common shares outstanding                          3,631,457             3,714,838            3,646,830

            Dilutive effect of                                                                                      
            stock options on net income                          249,162               253,542              277,560
                                                       ------------------    ------------------    -----------------

                                                               3,880,619             3,968,380            3,924,390
                                                       ------------------    ------------------    -----------------

        Diluted earnings per share:                                $0.79                 $0.73                $0.78
                                                       ==================    ==================    =================
</TABLE>

                                      F-13
<PAGE>

                                              DECORATOR INDUSTRIES, INC.
                                            NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

 (12)    QUARTERLY FINANCIAL INFORMATION 
         -------------------------------

                                              First           Second           Third           Fourth
         1998                                Quarter          Quarter         Quarter          Quarter           Year
         ----                                -------          -------         -------          -------           ----
<S>                                          <C>              <C>             <C>              <C>             <C>        
         Net Sales                           $12,649,704      $13,709,226     $13,210,272      $12,397,627     $51,966,829
         Gross Profit                         $2,986,507       $3,009,633      $2,795,094       $2,629,270     $11,420,504
         Net Income                             $879,888         $911,903        $711,515         $577,589      $3,080,895
         Earnings Per
         Common Share:
             Continuing Operations                 $0.24            $0.25           $0.20            $0.16           $0.85
             Basic                                 $0.24            $0.25           $0.20            $0.16           $0.85
             Diluted                               $0.22            $0.23           $0.19            $0.15           $0.79
         Average Common
         Shares Outstanding:
             Basic                             3,655,994        3,662,245       3,639,427        3,573,056       3,631,457
             Diluted                           3,885,200        3,948,675       3,918,211        3,775,283       3,880,619

                                              First           Second           Third           Fourth
         1997                                Quarter          Quarter         Quarter          Quarter           Year
         ----                                -------          -------         -------          -------           ----

         Net Sales                            $9,386,543      $11,777,358     $11,051,332      $11,180,690     $43,395,923
         Gross Profit                         $2,464,389       $2,968,229      $2,545,621       $2,681,567     $10,659,806
         Net Income                             $702,606         $879,544        $636,223         $679,966      $2,898,339
         Earnings Per
         Common Share:
             Continuing Operations                 $0.19            $0.25           $0.20            $0.18           $0.82
             Basic                                 $0.19            $0.24           $0.17            $0.18           $0.78
             Diluted                               $0.18            $0.22           $0.16            $0.17           $0.73
         Average Common
         Shares Outstanding:
             Basic                             3,708,145        3,724,564       3,734,516        3,690,828       3,714,838
             Diluted                           3,993,858        3,967,754       3,989,620        3,922,290       3,968,380
</TABLE>

                                      F-14


<PAGE>
                     REPORT OF INDEPENDENT AUDITORS' REPORT
                         ON FINANCIAL STATEMENT SCHEDULE




The Board of  Directors
  and Stockholders of
Decorator Industries, Inc.



         The audit referred to in our opinion dated February 20, 1999 of the
financial statements as of January 2, 1999 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.





                                             LOUIS PLUNG & COMPANY, LLP
                                             Certified Public Accountants









Pittsburgh, Pennsylvania
February 20, 1999



                                      F-15


<PAGE>
<TABLE>
<CAPTION>
                           DECORATOR INDUSTRIES, INC.
                SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS


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

ALLOWANCE FOR
DOUBTFUL ACCOUNTS

                  1998                         $218,018           $68,471            -0-          $174,783(A)       $111,706

                  1997                          232,302            (4,000)           -0-            10,284(A)        218,018

                  1996                          229,722            40,000            -0-            37,420(A)        232,302
</TABLE>

(A) Write-off bad debts


                                      F-16