The Dixie Group, Inc. (NASDAQ:DXYN) today reported financial
results for the second quarter of 2015 ended June 27, 2015. Sales
for the second quarter were $109,957,000 as compared to
$107,926,000 in the same quarter a year ago. Profit from continuing
operations was $516,000, or $0.03 per diluted share, versus a loss
of $509,000, or $0.04 per diluted share, for the same quarter last
year.
Commenting on the results, Daniel K. Frierson, chairman and
chief executive officer, said, “Sales in the second quarter started
off strong but moderated throughout the period. Our sales of $110
million were 1.9% ahead of the same quarter last year while the
industry overall was down slightly. Excluding Atlas Carpet Mills,
our sales growth for the quarter on a year-over-year basis was
4.6%.
“Sales for residential products declined 0.4% compared to the
same quarter in the prior year, while the industry was down mid to
low single digits. Sales of residential products started stronger
in April but slowed down during the quarter relative to our
performance a year ago. However, we anticipate the residential
remodeling market to have marginal growth for the remainder of the
year. Our increase in commercial product sales was 6.7% compared to
the same period last year, and as compared to industry growth, we
estimate, in the low single digits. Our Masland Commercial products
had a sales increase of 17.7% on a year-over-year basis. The
efforts at Masland were helped by the creation of Masland
Hospitality late in 2014, assisted by our acquisition of CYP
technology in the fall of 2014. We continue to see a healthy
commercial market throughout 2015. Atlas was still underperforming
relative to the prior year, as we were delayed in getting out our
new product introductions in 2014 due to issues related to delivery
of new technology in 2014, as well as integration issues relative
to the Atlas purchase. We are pleased with the new Atlas products
we have introduced so far in 2015. Atlas order entry has continued
to improve as we enter the third quarter of 2015 relative to
earlier in the year.
“Gross profit for the quarter was 26.7% of net sales as compared
to 24.7% the same quarter in the prior year and 24.3% in the first
quarter of 2015. Gross profit improved as a result of improved
operations following our restructuring, and income of $459 thousand
from an adjustment to estimated acquisition-related contingent
payments that was offset by continued higher-than-normal levels of
quality, training and waste costs. We anticipate continued
improvements in waste, training and quality costs in the third and
fourth quarters. Operating income was $2.2 million for the quarter
as compared to $588 thousand for the second quarter of 2014.
Selling and administrative costs were 23.8% of net sales for the
quarter as compared to 22.5% for the same quarter of 2014. We have
higher sampling costs in both our residential and commercial
businesses this year. The planned launch of new products for Atlas
Carpet Mills were delayed in 2014, so we have a very robust line of
new products being introduced in 2015. In addition, our residential
business has an unusually high sample expense from several
additional national product launches in 2015.
“Facility consolidation and asset impairment expenses during the
period were $875 thousand as compared to $1.7 million a year ago.
We have completed our west coast consolidation plan. The only
remaining significant east coast manufacturing consolidation
activities are in our Atmore and Saraland facilities. Other
restructuring-related expenses, reflected in our higher cost of
sales, were higher than the normal levels of training, quality and
waste costs for the period. These costs improved relative to the
first quarter and we expect them to further decline in the second
half of the year. We are announcing the consolidation of three of
our existing divisional and corporate offices to a single facility
located in Dalton, Georgia. The consolidation plan is estimated to
cost $716 thousand dollars. The majority of the costs primarily
relate to lease cancellation charges for the facilities we are
vacating. Those planned charges, as well as the remaining costs of
our manufacturing consolidation plans are detailed in the attached
table. Our plan is to continue to improve costs through emphasis on
training and process improvements, thus regaining the quality and
waste levels we had before the restructuring.
“Other impacts during the quarter were in the areas of higher
medical costs. In the second quarter of 2015, we continued to
experience significantly higher costs associated with our
self-insured group medical plans. We have taken additional actions,
besides those described in the first quarter report, in plan
design, incentives to utilize disease management services and
additional rate increases to our associates that we believe will
mitigate future costs. Further, we will introduce an all new
self-insured medical plan in 2016 to better control costs going
forward. We anticipate sampling costs to decline in 2016 and return
to historical levels at that time. Our tax rate, at 44%, was higher
due to truing up the tax expense for the year. Going forward, we
anticipate a tax rate of 35% at normal levels of profitability. We
have improved operating margins from both the first quarter and a
year ago but still are not satisfied with our performance.
“Current assets increased $5.4 million during the quarter,
primarily due to higher levels of inventory and trade receivables.
Current liabilities increased $3.3 million during the quarter,
mostly due to higher advanced customer deposits for custom goods.
Capital equipment acquisitions, including those funded by cash and
financings were $2.6 million. Depreciation and amortization was
$3.7 million for the quarter. We anticipate capital expenditures of
$13.5 million for the year of 2015 and depreciation and
amortization of $14.5 million. We ended the quarter with $133.8
million in debt and availability of $35.3 million.
“Sales for the first four weeks of the third quarter are ahead
of the same quarter last year by 5%, while our carpet sales are
ahead of last year by over 6% on a year-over-year basis. The new
home building segment is stronger and we have recently seen home
resales at higher levels. Therefore, the remodeling market should
be helped by a tightening housing market. We see continued
opportunities in the residential market. Specific opportunities are
in the growth of our wool broadloom and rug businesses, our
Stainmaster® PetProtect™ products and the continued development of
beautiful patterns to service the upper-end residential market
utilizing both our ColorPoint™ and iTuft™ tufting technologies. The
commercial market, and especially the hospitality sector, continues
to see good growth. We have continued our growth in our modular
tile offerings in both the Masland Contract and Atlas markets.
Further, we are pleased with the activity we are seeing in Masland
Hospitality as we leverage our investment in custom computerized
yarn placement tufting technology. We want to thank our associates
for their hard work and dedication during this period as we
transition our facilities to be specifically focused on specific
end markets. As always, we continue to be dedicated to supplying
our customers with the most advanced style and design products of
the highest quality,” 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. The simulcast will begin at
approximately 11:30 a.m. Eastern Time on July 29, 2015. A replay
will be available approximately two hours later and will continue
for approximately 30 days. If Internet access is unavailable, a
listen-only telephonic conference will be available by dialing
(913) 312-0863 and entering 6508802 at least ten minutes before the
appointed time. A seven-day telephonic replay will be available two
hours after the call ends by dialing (719) 457-0820 and entering
6508802 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, Masland
Hospitality and Avant brands.
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 June 27,2015 June 28,2014 June
27,2015 June 28,2014 NET SALES $ 109,957 $ 107,926 $
205,812 $ 193,008 Cost of sales 80,651
81,255 153,167 148,236 GROSS
PROFIT 29,306 26,671 52,645 44,772 Selling and administrative
expenses 26,191 24,260 50,948 44,377 Other operating expense, net
63 219 553 371 Facility consolidation expenses 875 949 1,650 1,022
Impairment of assets — 655 —
655 OPERATING INCOME (LOSS) 2,177 588 (506 )
(1,653 ) Interest expense 1,222 1,158 2,400 2,169 Other (income)
expense, net 31 (47 ) 41 (36 ) Gain on purchase of business
— — — (10,937 ) Income
(loss) from continuing operations before taxes 924 (523 ) (2,947 )
7,151 Income tax provision (benefit) 408 (14 )
(1,083 ) 2,840 Income (loss) from continuing
operations 516 (509 ) (1,864 ) 4,311 Loss from discontinued
operations, net of tax (12 ) (135 ) (100 )
(328 ) NET INCOME (LOSS) $ 504 $ (644 )
$ (1,964 ) $ 3,983 BASIC EARNINGS
(LOSS) PER SHARE: Continuing operations $ 0.03 $ (0.04 ) $ (0.12 )
$ 0.31 Discontinued operations — (0.01 )
(0.01 ) (0.02 ) Net income (loss) $ 0.03
$ (0.05 ) $ (0.13 ) $ 0.29
DILUTED EARNINGS (LOSS) PER SHARE: Continuing operations $
0.03 $ (0.04 ) $ (0.12 ) $ 0.30 Discontinued operations —
(0.01 ) (0.01 ) (0.02 ) Net income
(loss) $ 0.03 $ (0.05 ) $ (0.13 )
$ 0.28 Weighted-average shares outstanding:
Basic 15,546 13,937 15,490 13,363 Diluted 15,656
13,937 15,490 13,561
THE DIXIE GROUP, INC.
Consolidated Condensed Balance
Sheets
(in thousands)
June 27,2015
December 27,2014
ASSETS (Unaudited) Current Assets Cash and cash equivalents $ 445 $
394 Receivables, net 54,111 50,524 Inventories 114,405 104,207
Other 19,665 18,692 Total Current Assets
188,626 173,817 Property, Plant and Equipment, Net 103,835
102,489 Goodwill and Other Intangibles 6,614 6,767 Other Assets
17,886 17,807 TOTAL ASSETS $ 316,961
$ 300,880 LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities Accounts payable and accrued expenses $ 63,475
$ 51,415 Current portion of long-term debt 9,208
9,078 Total Current Liabilities 72,683 60,493
Long-Term Debt 124,584 118,210 Deferred Income Taxes 8,739 9,376
Other Liabilities 19,521 19,824 Stockholders' Equity 91,434
92,977 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 316,961 $ 300,880
Use of Non-GAAP Financial Information:(in
thousands)
The Company believes that non-GAAP performance measures, which
management uses in evaluating the Company's business, may provide
users of the Company's financial information with additional
meaningful bases for comparing the Company's current results and
results in a prior period, as these measures reflect factors that
are unique to one period relative to the comparable period.
However, the non-GAAP performance measures should be viewed in
addition to, not as an alternative for, the Company's reported
results under accounting principles generally accepted in the
United States. In considering our supplemental financial measures,
investors should bear in mind that other companies that report or
describe similarly titled financial measures may calculate them
differently. Accordingly, investors should exercise appropriate
caution in comparing our supplemental financial measures to
similarly titled financial measures report by other companies.
Non-GAAP Summary Three Months Ended Non-GAAP Gross
Profit
June 27,2015
June 28,2014 Net Sales $ 109,957 $ 107,926
Gross Profit $ 29,306 $ 26,671 Plus: Amortization of Acquisition
Inventory Step-up — 194 Non-GAAP
Adjusted Gross Profit (Note 1) $ 29,306 $
26,865 Gross Profit as % of Net Sales 26.7 % 24.7 %
Non-GAAP Adjusted Gross Profit % of Net Sales 26.7 % 24.9 %
The Company defines Adjusted Gross Profit as Gross Profit plus
manufacturing integration expenses of new or expanded operations,
plus amortization of acquisition inventory step-up, plus one-time
items so defined. (Note 1)
Three Months Ended Non-GAAP Adjusted Selling
and Administrative Expenses
June 27,2015
June 28,2014 Net Sales $ 109,957 $ 107,926 Selling
and Administrative Expenses $ 26,191 $ 24,260 Less: Mfg.
Integration Expense — (269 ) Less: Acquisition Expense —
(154 ) Non-GAAP Adjusted Selling and Administrative
Expenses (Note 2) $ 26,191 $ 23,837
Selling and Administrative Expenses as % of Net Sales 23.8 %
22.5 % Non-GAAP Adjusted Selling and Administrative Expenses as %
of Net Sales 23.8 % 22.1 % The Company defines Adjusted
Selling and Administrative Expenses as Selling and Administrative
Expenses less manufacturing integration expenses and direct
acquisition expenses included in Selling and Administrative
Expenses, less one-time items so defined. (Note 2) Non-GAAP Summary
Three Months Ended Non-GAAP Operating Income (Loss) June
27,2015 June 28,2014 Net Sales $ 109,957 $ 107,926
Operating Income (Loss) $ 2,177 $ 588 Plus: Acquisition
Expense — 154 Plus: Amortization of Acquisition Inventory Step-up —
194 Plus: Mfg. Integration Expense — 269 Plus: Facility
Consolidation Expense 875 949 Plus: Impairment of Assets —
655 Non-GAAP Adjusted Operating Income (Loss) (Note
3) $ 3,052 $ 2,809 Operating Income
(Loss) as % of Net Sales 2.0 % 0.5 % Adjusted Operating Income
(Loss) as a % of Net Sales 2.8 % 2.6 % The Company defines
Adjusted Operating Income (Loss) as Operating Income (Loss) plus
manufacturing integration expenses of new or expanded operations,
plus amortization of acquisition inventory step-up, plus facility
consolidation and severance expenses, plus direct acquisition
expenses, plus impairment of assets, plus impairment of goodwill,
plus one-time items so defined. (Note 3) Non-GAAP Summary
Three Months Ended Non-GAAP EBIT and EBITDA June 27,2015
June 28,2014 Net Income (Loss) as Reported $ 504 $ (644 )
Less: Loss from Discontinued Operations, Net of Tax (12 ) (135 )
Plus: Taxes 408 (14 ) Plus: Interest 1,222 1,158
Non-GAAP Adjusted EBIT (Note 5) 2,146 635 Plus: Depreciation
and Amortization 3,665 3,262 EBITDA 5,811
3,897 Plus: Acquisition Expense — 154 Plus: Amortization of
Acquisition Inventory Step-up — 194 Plus: Facility Consolidation
Expense 875 949 Plus: Mfg. Integration Expense — 269 Plus:
Impairment of Assets — 655 Non-GAAP Adjusted
EBITDA (Note 5) $ 6,686 $ 6,118
Non-GAAP Adjusted EBITDA as % of Net Sales 6.1 % 5.7 % The
Company defines Adjusted EBIT as Net Income (Loss) less loss from
discontinued operations, plus taxes and plus interest. The Company
defines Adjusted EBITDA as Adjusted EBIT plus depreciation and
amortization, plus manufacturing in integration expenses of new or
expanded operations, plus facility consolidation and severance
expenses, plus amortization of acquisition inventory step-up, plus
direct acquisition expenses, less gain on purchase of business,
plus impairment of assets, plus impairment of goodwill, plus
one-time items so defined. (Note 5) Non-GAAP Summary
Three Months Ended Non-GAAP Free Cash Flow
June 27,2015
June 28,2014
Non-GAAP Adjusted EBIT $ 2,146 $ 635 Times: 1 - Tax
Rate = EBIAT 1,331 393 Plus: Depreciation and amortization 3,665
3,262 Plus: Non-cash impairment of assets — 655 Minus: Net change
in working capital 2,073 3,575 Non-GAAP
Cash from Operations 2,923 735 Minus: Capital expenditures, net of
asset sales 2,593 4,192 Non-GAAP Free
Cash Flow (Note 6) $ 330 $ (3,457 ) The
Company defines Free Cash Flow as Non-GAAP Adjusted EBIT plus
interest plus depreciation and amortization, plus non-cash
impairment of assets and goodwill, minus the net change in working
capital minus the tax shield on interest, minus capital
expenditures, net of asset sales, minus business/capital
acquisitions. The change in net working capital is the change in
current assets less current liabilities between periods. (Note 6)
Facility Consolidation Plan Summary Q1 2015 Q2
2015
Q3 2015Est.
Q4 2015Est.
2016 Est. Warehousing, Distribution & Manufacturing
Consolidation Plan $ 605 $ 840 $ 369 $
259 $ 318 Atlas Integration Plan 170 35 — — — Corporate
Office Consolidation Plan — —
398 318 — Total Facility Consolidation
Expense $ 775 $ 875 $ 767
$ 577 $ 318
Further non-GAAP reconciliation data are available at
www.thedixiegroup.com under the Investor Relations section.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150729005359/en/
The Dixie Group, Inc.Jon Faulkner, 706-876-5814Chief Financial
Officerjon.faulkner@dixiegroup.com
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