The Dixie Group reports Third Quarter 2018 Results, Continues the Rollout of Its $11 Million Profit Improvement Plan
DALTON, Ga., Nov. 08, 2018 (GLOBE NEWSWIRE) -- The Dixie Group, Inc. (NASDAQ: DXYN) today reported financial results for the quarter ended September 29, 2018. For the third quarter of 2018, the Company had net sales of $101,562,000 as compared to $102,650,000 in 2017. The Company’s third quarter net sales were down 1.1% as compared to the same period in 2017 while the industry, we estimate, ...
On a non-GAAP basis, as shown on the attached schedule, the results from continuing operations would have been a loss of
Commenting on the results,
As our productivity, service and quality have improved, we are in a position to reduce staffing in many of our facilities. We began the reduction in June with our
Our residential product sales were up 5.6% for the quarter. Our residential soft surface floor covering continued to grow market share, while the residential replacement segment, we estimate, was down slightly as compared to the prior year. Through the quarter, we saw very strong sales in our new STAINMASTER® carpet introductions, including both PetProtect® and Luxerell® segments. Also in the quarter, we began shipping our newly revamped Masland eNergy™ main street commercial product line. Masland eNergy™ is an upscale, modern take on the traditional main street commercial segment. Our eNergy™ products are well styled and feature type 6,6 nylon delivering the performance required by the most demanding segments of the commercial market. We have seen ready acceptance of our new displays by the market. Late in the quarter, we began shipment of our new EnVision 6,6™ collection. This new program is an extension of our
Our commercial product sales in the third quarter were down 16.1%. Our soft surface commercial sales were down while the industry, we believe, was up in the low single digits. We have been slower in adapting to the transition in the marketplace from broadloom to modular carpet tile as well as the shift from piece dyed product to solution dyed yarn systems. To respond to these trends and improve our speed to market with newer more relevant products, we announced the unification of our two commercial brands, Atlas and Masland Contract, into one operating division of the Company in the fourth quarter of 2017. The final phase of this Profit Improvement Plan, announced in the third quarter, includes the integration of our west coast commercial manufacturing into our
The consolidation of Atlas and Masland Contract provides an exciting opportunity for us to become a greater resource to our customers in the competitive commercial flooring market. This unification also includes our creative team which will relocate to our Design Studio in
Our custom capabilities are unparalleled, providing for unlimited possibilities. Whether a project calls for broadloom carpet, modular carpet tile, area rugs, walk off material or luxury vinyl flooring, we have the product and expertise to service our targeted specified commercial market segments. This combined approach recognizes designers time constraints and the variety of products today’s commercial projects utilize. By expanding the sales coverage of our products, such as with the sustainable design of our Masland Contract’s Tops collection, incorporating Thrive® by Universal Fibers® solution dyed nylon with 75% recycled content, we anticipate higher sales through the unified sales force.
We have already benefited from the merger of the management of the two commercial brands, announced in the fourth quarter of 2017, with lower commercial selling and administrative expenses during the third quarter of 2018," concluded Frierson.
Our gross profit for third quarter of 2018 was 21.6% of net sales as compared to a gross profit of 24.2% in 2017. Excluding the inventory write-downs associated with the announced closure of our two tufting operations under the Profit Improvement Plan, our gross profit would have been 22.5%. The lower gross profit was impacted by the very low sales volume in our commercial business during the period, thus leading to high unabsorbed fixed cost.
We implemented a residential price increase late in the third quarter primarily to offset higher labor, material and other operational costs. We continue to adjust staffing levels in our manufacturing operations to better align staffing with demand.
Selling and administrative expenses for the quarter were 22.7% of net sales, a decrease of 0.7 percentage points from our level of 23.4% in the third quarter of 2017. The decrease in our selling and administrative costs is primarily due to the Profit Improvement Plan we initiated in the fourth quarter of last year as we consolidated our two commercial management teams under the leadership of
Expenses contributing to the loss during the period included several charges related to the Company's previously announced Profit Improvement Plan. The Plan included our decisions to fully exit the
Our receivables decreased
Our floorcovering sales for the first 5 weeks of the quarter are down mid-single digits versus the same period in 2017. Sales for our residential business are up for the first 5 weeks while our commercial business is behind compared to this same period last year. We are pleased with the progress we are making with our Profit Improvement Plan and anticipate the bulk of the savings to be in place by the end of the first quarter in 2019.
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/. The simulcast will begin at approximately
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, ability to attract, develop and retain qualified personnel 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
Consolidated Condensed Statements of Operations (unaudited; in thousands, except earnings per share) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(As Adjusted) | (As Adjusted) | ||||||||||||||
$ | 101,562 | $ | 102,650 | $ | 306,858 | $ | 307,378 | ||||||||
Cost of sales | 79,675 | 77,793 | 238,247 | 228,934 | |||||||||||
GROSS PROFIT | 21,887 | 24,857 | 68,611 | 78,444 | |||||||||||
Selling and administrative expenses | 23,033 | 24,049 | 69,954 | 73,802 | |||||||||||
Other operating (income) expense, net | (845 | ) | 46 | 421 | 84 | ||||||||||
Facility consolidation and severance expenses, net | 529 | — | 936 | — | |||||||||||
Impairment of assets | 349 | — | 349 | — | |||||||||||
OPERATING (LOSS) INCOME | (1,179 | ) | 762 | (3,049 | ) | 4,558 | |||||||||
Interest expense | 1,664 | 1,486 | 4,840 | 4,205 | |||||||||||
Other (income) expense, net | (3 | ) | 4 | — | 22 | ||||||||||
Income (loss) from continuing operations before taxes | (2,840 | ) | (728 | ) | (7,889 | ) | 331 | ||||||||
Income tax provision (benefit) | 82 | (181 | ) | (110 | ) | 227 | |||||||||
Income (loss) from continuing operations | (2,922 | ) | (547 | ) | (7,779 | ) | 104 | ||||||||
Income (loss) from discontinued operations, net of tax | (40 | ) | (11 | ) | 94 | (163 | ) | ||||||||
NET LOSS | $ | (2,962 | ) | $ | (558 | ) | $ | (7,685 | ) | $ | (59 | ) | |||
BASIC EARNINGS (LOSS) PER SHARE: | |||||||||||||||
Continuing operations | $ | (0.19 | ) | $ | (0.03 | ) | $ | (0.49 | ) | $ | 0.00 | ||||
Discontinued operations | (0.00 | ) | (0.00 | ) | 0.01 | (0.01 | ) | ||||||||
Net Loss | $ | (0.19 | ) | $ | (0.03 | ) | $ | (0.48 | ) | $ | (0.01 | ) | |||
DILUTED EARNINGS (LOSS) PER SHARE: | |||||||||||||||
Continuing operations | $ | (0.19 | ) | $ | (0.03 | ) | $ | (0.49 | ) | $ | 0.00 | ||||
Discontinued operations | (0.00 | ) | 0.00 | 0.01 | (0.01 | ) | |||||||||
Net Loss | $ | (0.19 | ) | $ | (0.03 | ) | $ | (0.48 | ) | $ | (0.01 | ) | |||
Weighted-average shares outstanding: | |||||||||||||||
Basic | 15,786 | 15,707 | 15,754 | 15,696 | |||||||||||
Diluted | 15,786 | 15,707 | 15,754 | 15,814 | |||||||||||
Consolidated Condensed Balance Sheets (in thousands) | |||||||
2018 | 2017 | ||||||
(As Adjusted) | |||||||
ASSETS | (Unaudited) | ||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 14 | $ | 19 | |||
Receivables, net | 49,011 | 46,480 | |||||
Inventories, net | 118,212 | 113,657 | |||||
Prepaids and other current assets | 8,589 | 4,669 | |||||
Total Current Assets | 175,826 | 164,825 | |||||
Property, Plant and Equipment, Net | 86,788 | 93,785 | |||||
5,621 | 5,850 | ||||||
Other Assets | 18,939 | 19,447 | |||||
TOTAL ASSETS | $ | 287,174 | $ | 283,907 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable and accrued expenses | $ | 52,225 | $ | 49,901 | |||
Current portion of long-term debt | 8,578 | 9,811 | |||||
Total Current Liabilities | 60,803 | 59,712 | |||||
Long-Term Debt | 132,707 | 123,446 | |||||
Other Long-Term Liabilities | 19,535 | 21,486 | |||||
Stockholders' Equity | 74,129 | 79,263 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 287,174 | $ | 283,907 |
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 an additional meaningful basis for comparing the Company's current and prior period results, 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
Non-GAAP Summary |
Three Months Ended | Nine Months Ended | ||||||||||||||
Non-GAAP Income (Loss) From Continuing Operations | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net Income (Loss) as Reported | $ | (2,962 | ) | $ | (558 | ) | $ | (7,685 | ) | $ | (59 | ) | |||
Income (Loss) from Discontinued Operations, Net of Tax | (40 | ) | (11 | ) | 94 | (163 | ) | ||||||||
Income (Loss) from Continuing Operations | (2,922 | ) | (547 | ) | (7,779 | ) | 104 | ||||||||
Inventory Write Down as Part of Facilities Exit | 963 | 963 | |||||||||||||
Facility Consolidation and Severance Expenses, Net | 529 | — | 936 | — | |||||||||||
Impairment of Assets | 349 | — | 349 | — | |||||||||||
Workers Compensation Claim | — | — | 450 | — | |||||||||||
California Legal Settlement | — | — | 1,514 | — | |||||||||||
Tax Effect of Above | — | — | — | — | |||||||||||
Non-GAAP Adjusted Income (Loss) From Continuing Operations (Note 1) | $ | (1,081 | ) | $ | (547 | ) | $ | (3,567 | ) | $ | 104 | ||||
Adjusted Diluted Earnings (Loss) Per Share from Continuing Operations | $ | (0.07 | ) | $ | (0.03 | ) | $ | (0.23 | ) | $ | 0.01 | ||||
Weighted-Average Diluted Shares Outstanding | 15,786 | 15,707 | 15,754 | 15,814 | |||||||||||
NOTE 1 -The Company defines Adjusted Income (Loss) from Continuing Operations as Net Income (Loss) less loss from discontinued operations, net of tax, plus manufacturing integration expenses of new or expanded operations, plus facility consolidation and severance expenses, plus direct acquisition expenses, plus impairment of assets, plus unusual items so defined. | |||||||||||||||
CONTACT:
Chief Financial Officer
706-876-5814
jon.faulkner@dixiegroup.com