The Dixie Group Increases Cost Reductions By $6.0 Million in Updated Profit Improvement Plan
February 04 2019 - 7:15AM
The Dixie Group, Inc. (“the Company”) (Nasdaq: DXYN) has updated
its previously announced profit improvement plan to reflect further
cost reductions and additional charges associated with the plan’s
implementation. The Company has committed to the updated plan as
part of its continuing efforts to improve efficiencies and
streamline operations to more closely align its operating structure
with its business and value creation strategy. The updated plan
increased estimated cost reductions by $6.0 million to a total of
$17.1 million.
Commenting on the revised plan, Daniel K.
Frierson, Chairman and Chief Executive Officer, said, “We updated
the plan after a review of all departments and operations to speed
our return to profitability. The updated plan involves (i) a
reduction of an additional 46 positions, bringing the total
headcount reduction to approximately 329 positions since the
beginning of 2018 or 17% of our workforce, (ii) additional
write-down of certain obsolete, underutilized and impaired
inventories, manufacturing and intangible assets and (iii) the
previously announced closure of two of our commercial manufacturing
operations and consolidation of those activities into other
facilities. We will have incurred substantially all of the costs of
implementing the revised plan by the end of the first quarter with
anticipated ongoing cost reductions being substantially realized by
the third quarter of 2019.”
In connection with the revised plan, the Company
expects to incur a pre-tax restructuring and asset impairment
charge in the fourth quarter of 2018 of approximately $6.1 million
and further charges in early 2019 of approximately $2.1 million.
The cost of the entire plan is estimated to be approximately $11.1
million, comprised of severance expenses ($2.0 million), facility
shutdown expenses ($780 thousand), equipment relocation and
infrastructure changes ($3.1 million), inventory impairments ($2.7
million) and non-cash impairment of equipment and intangible assets
($2.5 million). In its current form, the restructuring plan is
expected to be substantially complete in the first quarter of 2019.
The plan is expected to yield gross annual cost reductions, once
fully implemented later in 2019, of approximately $17.1 million as
compared to our previous estimate of $11.1 million as detailed
below.
Plan |
Total Costs Incurred as of9-29-2018 |
CostsIncurred during Q42018 |
Total CostsIncurred asof 12-29-2018 |
TotalAnticipatedCosts |
Profit Improvement
Plan |
1,565 |
2,228 |
3,793 |
5,906 |
Asset Impairments |
349 |
2,131 |
2,480 |
2,480 |
Inventory
Impairments in cost of sales |
963 |
1,738 |
2,701 |
2,701 |
Total
Cost |
2,877 |
6,097 |
8,974 |
11,087 |
|
|
|
|
|
Plan |
Total CostReductionsas of9-29-2018 |
AdditionalCostReductions |
Total CostReductionsanticipatedas of2-5-2019 |
|
Profit Improvement
Plan |
11,124 |
5,626 |
16,750 |
|
Asset
Impairments |
0 |
305 |
305 |
|
Total
All Plans |
11,124 |
5,931 |
17,055 |
|
Statements in this news release, which relate to
the future, 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 possibility that negotiations will not be successful,
that contract terms will not be as expected, and that levels of
demand for the products produced by the Company will change.
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, 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.
CONTACT:
Jon FaulknerChief Financial
Officer706-876-5814jon.faulkner@dixiegroup.com
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