The Dixie Group Reports the Completion of the Sale of its Susan Street Facility and Initiation of its Stock Buyback Program
October 22 2019 - 4:30PM
The Dixie Group, Inc. (NASDAQ: DXYN) reported the sale of its Susan
Street facility, and approximately 10 acres of surrounding property
located in Santa Ana, California to the CenterPoint Properties
Trust for a net purchase price of approximately $37.2 million. The
sale will result in reducing debt under the Company’s Revolving
Credit Facility by over 35% and increasing equity by over 50%. As
previously disclosed, completion of the sale was a condition to the
implementation of the Company’s stock repurchase program, pursuant
to which the Company is authorized to purchase up to $5.9 million
of its shares between completion of the sale and March 2020.
On October 22, 2019, TDG Operations, LLC, a
Georgia limited liability company and a wholly-owned subsidiary of
The Dixie Group, Inc., completed the sale of its Susan Street
facility located in Santa Ana, California for a net purchase price
of $37.2 million. Concurrent with the sale of the Property, The
Dixie Group and the CenterPoint entered into a ten-year lease
agreement, whereby Dixie Group will lease back the property at an
annual rental rate of $2.1 million, subject to annual rent
increases of 2.0%. Under the lease, The Dixie Group has two (2)
consecutive options to extend the term of the Lease by five (5)
years for each such option.
As finally negotiated by the parties, and under
the terms of the sale agreement and the Susan Street Lease
Agreement, certain anticipated costs, including, among others, the
full cost of roof repair, repaving of the facility’s parking lot,
replacement of HVAC equipment and repair of the facility’s interior
upon termination of the lease, are to be borne by the purchaser,
instead of by the tenant, and, in exchange, the purchase price was
set at the level described above, and the annual rental and
escalator were adjusted to the levels described herein.
Simultaneously with the sale, the registrant
paid down its credit facility by approximately $36.3 million. Prior
to completing the Purchase and Sale Agreement, Dixie Group entered
into that certain Consent and Thirteenth Amendment to Credit
Agreement dated October 22, 2019, pursuant to which the Company’s
lender consented to the sale of the Santa Ana Property. This
amendment also adjusted the size of the credit facility to $120
million as well as other terms relative to the sale of the Santa
Ana property.
The Company expects to incur an after-tax gain
of approximately $25 million. As of the date hereof, net accessible
availability under the Company’s Revolving Credit Facility is
approximately $22.0 million, leaving an outstanding debt balance of
$57.2 million under that Credit Facility.
As previously disclosed The Dixie Group entered
into a 10b5-1 Plan to facilitate repurchase of up to $5.9 million
of its common shares contingent upon the now completed sale of the
Santa Ana Susan Street facility and continuing until March 2020.
Any purchases made under the Plan will be structured to come within
Rule 10b-18 and will be managed by Raymond James &
Associates.
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 | Masland
Contract and Dixie International brands.
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.
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CONTACT: |
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Jon Faulkner |
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Chief Financial Officer |
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706-876-5814 |
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jon.faulkner@dixiegroup.com |
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