The Dixie Group Reports Second Quarter 2017 Results
August 03 2017 - 5:00AM
The Dixie Group, Inc. (NASDAQ:DXYN) today reported financial
results for the quarter ended July 1, 2017. The Company’s second
quarter sales were $107.2 million or 1.8% above the same quarter a
year ago. For the six month period total net sales increased 5.2%
to $204.7 million as compared to $194.6 million in the year earlier
period. Income from continuing operations was $1,226,000, or $0.08
per fully diluted share, for the second quarter of 2017 as compared
to income from continuing operations of $1,615,000, or $0.10 per
fully diluted share, in the second quarter of 2016.
Commenting on the results, Daniel K. Frierson,
chairman and chief executive officer, said, “For the quarter, our
floorcovering sales were up year over year by 3.6% while the
industry, we believe, was flat. For the year to date our
floorcovering sales were up 7.4% versus prior year and versus a
market that was flat year over year. Our commercial product sales
for the quarter were flat while the market was down in the low
single digits. Further, our commercial product sales were up 5.0%
for the year to date relative to 2016 while the industry, we
estimate, was down low single digits. Our residential products were
up 5.4% for the quarter as compared to the second quarter of 2016
with the industry being up in the low single digit range. For the
six month period ending in June our residential product sales were
up 8.7% compared to the same time period in 2016 while the
industry, we believe, was up only in the low single digits.
Our gross profit for the quarter was 26.5% of
net sales as compared to 26.8% in the year earlier period.
For the six months our gross profit was 26.2% versus 24.5% for the
same period in 2016. Our results for the quarter and the year to
date were favorably impacted by the higher level of sales. We had a
price increase in the first quarter and a second price increase
late in the second quarter, as did the industry. Offsetting these
gains were higher raw material and medical costs. In addition,
during this time period we had over one million dollars in startup
expenses of our expanded Colormaster dyeing and Atmore yarn and
tile coating operations. These expansions are now fully
operational. The Colormaster expansion completes the centralization
of all of our east coast internal and external dyeing needs into a
single facility. The completion of our expanded yarn and tile
pre-coat operations at our Atmore, Alabama commercial facility
improves our response time while lowering the cost of our make to
order production model.
The launch of our Masland and Dixie Home
Stainmaster® PetProtect™ luxury vinyl flooring product lines is
going well. We have commitments to place over a thousand
displays in the marketplace between the two product lines. We
anticipate all of these displays to be shipped to retailers by the
end of the third quarter. Our Calibrè Line of luxury vinyl flooring
products continues to grow as we see the results of continued
placement in the specified commercial market.
In June Royalty Carpet Mills, a primarily west
coast supplier of residential carpet, chose to cease operations. We
took advantage of this opportunity to increase our presence by
placing additional retail displays and product lines with select
retailers across our three residential brands.In addition, with the
recognition that the industry is tight with respect to yarn
manufacturing due to higher face weights and tighter twist
construction, we purchased the operating machinery of Royalty’s
Porterville carpet yarn manufacturing operation. We are starting
production in Porterville at the beginning of August and will shift
most our west coast yarn demand to this facility. This also
relieves pressure on our Roanoke yarn manufacturing facility where
it simplifies the product mix and opens up capacity for growth.
Capital expenditures for the second quarter,
including those funded by cash and financings, were $2.7 million
and we anticipate a total of $13 million in capital expenditures
for 2017 compared to depreciation and amortization of $13.5 million
for 2017. We raised our estimated capital expenditures as we took
advantage of expanding our west coast business due to the
opportunity created by Royalty Carpet Mills choosing to cease
operations. Accessible availability under our credit lines was $22
million at the end of the second quarter while debt stood at $123.7
million at the end of the second quarter, an increase of $3.1
million in the quarter. We anticipate debt will climb in the third
quarter as we complete the initial stocking of our luxury vinyl
flooring programs and bring in fiber to complete the transition of
yarn production into Porterville. These temporary inventory
increases should moderate in the fourth quarter as we reach normal
sales and production levels from these two startup situations.
The third quarter has started off upbeat with
our floorcovering sales up over 9% over the first 4 weeks as
compared to this same time in 2016. Our total sales for this four
week period are up over 8%, the difference due to our exiting the
external yarn sales business in 2016. We are seeing sales increases
in both the residential and commercial markets during this period.
Our business seems to track consumer sentiment and the stock
market, as well as housing trends. The strength in single family
housing and home resales has improved the environment for the
carpet retail replacement business. Also, the changes in our
industry with the closing of Royalty's operations and the Beaulieu
announced bankruptcy offer opportunity for us to gain space and
commitment from the floorcovering retail community. As we move into
the second half of 2017, we continue our emphasis on providing high
quality, unique and beautiful products to our customers,” Frierson
concluded.
A listen-only Internet simulcast and replay of
Dixie's conference call may be accessed with appropriate software
at the Company's website at
www.thedixiegroup.com/investor/investor.html. The simulcast will
begin at approximately 11:00 a.m. Eastern Time on August 3, 2017. A
replay will be available approximately two hours later and will
continue for approximately 30 days. If internet access is
unavailable, a telephonic conference will be available by dialing
877-355-1003 and entering 54318182 at least ten minutes before the
appointed time. A seven-day telephonic replay will be available two
hours after the call ends by dialing 855-859-2056 and entering
54318182 when prompted for the access code.
The Dixie Group (www.thedixiegroup.com) is a
leading marketer and manufacturer of carpet and rugs to higher-end
residential and commercial customers through the Fabrica
International, Masland Carpets, Dixie Home, Atlas Carpet Mills,
Masland Contract and Masland Hospitality.
This press release contains forward-looking
statements. Forward-looking statements are based on estimates,
projections, beliefs and assumptions of management and the Company
at the time of such statements and are not guarantees of
performance. Forward-looking statements are subject to risk factors
and uncertainties that could cause actual results to differ
materially from those indicated in such forward-looking statements.
Such factors include the levels of demand for the products produced
by the Company. Other factors that could affect the Company's
results include, but are not limited to, raw material and
transportation costs related to petroleum prices, the cost and
availability of capital, integration of acquisitions and general
economic and competitive conditions related to the Company's
business. Issues related to the availability and price of energy
may adversely affect the Company's operations. Additional
information regarding these and other risk factors and
uncertainties may be found in the Company's filings with the
Securities and Exchange Commission. The Company disclaims any
obligation to update or revise any forward-looking statements based
on the occurrence of future events, the receipt of new information,
or otherwise
THE DIXIE GROUP, INC.Consolidated
Condensed Statements of Operations(unaudited; in
thousands, except earnings per share)
|
Three Months Ended |
|
Six Months Ended |
|
July 1, 2017 |
|
June 25, 2016 |
|
July 1, 2017 |
|
June 25, 2016 |
NET SALES |
$ |
107,187 |
|
|
$ |
105,316 |
|
|
$ |
204,728 |
|
|
$ |
194,550 |
|
Cost of sales |
78,761 |
|
|
77,074 |
|
|
151,141 |
|
|
146,802 |
|
GROSS PROFIT |
28,426 |
|
|
28,242 |
|
|
53,587 |
|
|
47,748 |
|
Selling
and administrative expenses |
25,261 |
|
|
24,320 |
|
|
49,742 |
|
|
47,986 |
|
Other
operating (income) expense, net |
(14 |
) |
|
118 |
|
|
39 |
|
|
385 |
|
Facility
consolidation expenses, net |
— |
|
|
401 |
|
|
— |
|
|
1,814 |
|
OPERATING INCOME (LOSS) |
3,179 |
|
|
3,403 |
|
|
3,806 |
|
|
(2,437 |
) |
Interest
expense |
1,357 |
|
|
1,333 |
|
|
2,719 |
|
|
2,657 |
|
Other
expense, net |
26 |
|
|
4 |
|
|
29 |
|
|
12 |
|
Income (loss) from continuing operations before taxes |
1,796 |
|
|
2,066 |
|
|
1,058 |
|
|
(5,106 |
) |
Income tax provision (benefit) |
570 |
|
|
451 |
|
|
408 |
|
|
(1,964 |
) |
Income (loss) from
continuing operations |
1,226 |
|
|
1,615 |
|
|
650 |
|
|
(3,142 |
) |
Income (loss) from
discontinued operations, net of tax |
(123 |
) |
|
62 |
|
|
(152 |
) |
|
52 |
|
NET INCOME (LOSS) |
$ |
1,103 |
|
|
$ |
1,677 |
|
|
$ |
498 |
|
|
$ |
(3,090 |
) |
|
|
|
|
|
|
|
|
BASIC EARNINGS (LOSS)
PER SHARE: |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.08 |
|
|
$ |
0.10 |
|
|
$ |
0.04 |
|
|
$ |
(0.20 |
) |
Discontinued operations |
(0.01 |
) |
|
0.00 |
|
|
(0.01 |
) |
|
0.00 |
|
Net income (loss) |
$ |
0.07 |
|
|
$ |
0.10 |
|
|
$ |
0.03 |
|
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
DILUTED EARNINGS (LOSS)
PER SHARE: |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.08 |
|
|
$ |
0.10 |
|
|
$ |
0.04 |
|
|
$ |
(0.20 |
) |
Discontinued operations |
(0.01 |
) |
|
0.00 |
|
|
(0.01 |
) |
|
0.00 |
|
Net income (loss) |
$ |
0.07 |
|
|
$ |
0.10 |
|
|
$ |
0.03 |
|
|
$ |
(0.20 |
) |
|
|
|
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
|
|
|
|
Basic |
15,707 |
|
|
15,645 |
|
|
15,690 |
|
|
15,623 |
|
Diluted |
15,826 |
|
|
15,783 |
|
|
15,805 |
|
|
15,623 |
|
|
|
|
|
|
|
|
|
THE DIXIE GROUP, INC.Consolidated
Condensed Balance Sheets(in
thousands)
|
July 1, 2017 |
|
December 31, 2016 |
ASSETS |
(Unaudited) |
|
|
Current Assets |
|
|
|
Cash and
cash equivalents |
$ |
133 |
|
|
$ |
140 |
|
Receivables, net |
53,612 |
|
|
43,605 |
|
Inventories, net |
111,991 |
|
|
97,237 |
|
Other |
4,272 |
|
|
4,376 |
|
Total
Current Assets |
170,008 |
|
|
145,358 |
|
|
|
|
|
Property, Plant and
Equipment, Net |
93,128 |
|
|
92,807 |
|
Goodwill and Other
Intangibles |
6,003 |
|
|
6,156 |
|
Other Assets |
25,255 |
|
|
24,666 |
|
TOTAL ASSETS |
$ |
294,394 |
|
|
$ |
268,987 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
Current
Liabilities |
|
|
|
Accounts
payable and accrued expenses |
$ |
62,223 |
|
|
$ |
53,509 |
|
Current portion of long-term debt |
8,905 |
|
|
10,122 |
|
Total
Current Liabilities |
71,128 |
|
|
63,631 |
|
|
|
|
|
Long-Term Debt |
114,828 |
|
|
98,256 |
|
Other Liabilities |
20,221 |
|
|
19,978 |
|
Stockholders'
Equity |
88,217 |
|
|
87,122 |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
294,394 |
|
|
$ |
268,987 |
|
CONTACT:
Jon Faulkner
Chief Financial Officer
706-876-5814
jon.faulkner@dixiegroup.com
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