The Dixie Group Reports Operating Income for Second Quarter of 2023

Highlights from the SecondQuarter 2023:Gross profit margin for three months of the second quarter of 2023 was 26.7% of net sales compared to 19.2% in the second quarter of 2022.Operating income for the three months of the second quarter of 2023 was $253 thousand compared to an operating loss of $2.9 million in the second quarter of 2022. The operating income in the current quarter included ...

Highlights from the SecondQuarter 2023:

• Gross profit margin for three months of the second quarter of 2023 was 26.7% of net sales compared to 19.2% in the second quarter of 2022.
• Operating income for the three months of the second quarter of 2023 was $253 thousand compared to an operating loss of $2.9 million in the second quarter of 2022. The operating income in the current quarter included $719 thousand in expenses related to facility consolidations.
• Order entryfor the monthof July 2023 is slightlyahead of the comparable periodin the prior year.

DALTON, GA / ACCESSWIRE / August 4, 2023 / The Dixie Group, Inc. (NASDAQ:DXYN) today reported financial results for the quarter ended July 1, 2023. For the three months of the second quarter of 2023, the Company had net sales of $74,009,000 as compared to $83,698,000 in the same quarter of 2022. Operating income was $253,000 compared to a loss of $2,935,000 in the second quarter of 2022. The operating income in 2023 included expenses totaling $719,000 related to facility consolidations. The net loss from continuing operations for the three months of the second quarter of 2023 was $1,620,000 or $0.11 per diluted share. In 2022, the net loss from continuing operations for the second quarter was $4,019,000 or $0.26 per diluted share.

For the six months ended July 1, 2023, net sales from continuing operations were $141,093,000, a 12.5% decrease from sales in the first six months of 2022 at $161,273,000. Operating income for the six months ended July 1, 2023 was $560,000 compared to an operating loss of $5,182,000 in the six month period ended June 25, 2022. The net loss from continuing operations for the six months ended July 1, 2023 was $3,171,000, or $0.22 per diluted share, compared to a net loss of $7,361,000, or $0.48 per diluted share, in the first six months of the prior year.

Commenting on the results, Daniel K. Frierson, Chairman and Chief Executive Officer, said, "Our second quarter results continued to show the positive impact of the plant consolidation and cost reductions we began in 2022. Our gross margins were strong as our manufacturing plants continue to operate at levels of high efficiency despite the lower year over year sales volume. A significant factor in the year over year sales decline was a loss of volume in the mass merchant channel, with our primary customer's strategy shifting toward lower price points. Excluding our mass merchant sales, net sales were down 9.1% over the prior year quarter. This decline in sales was primarily the continued result of high inflation and increased interest rates impacting consumer confidence and demand in the second quarter of 2023. For the first half of 2023, we have experienced higher selling expenses driven by samples and marketing investment for new product offerings, particularly in our new decorative line and the growing hard surface flooring market. The majority of the benefit of this current year expense will be reflected in sales in future periods.

In the second quarter we launched eleven new products in our synthetic soft surface lines. This included four new styles in our DH Floors collection made with DuraSilk™ solution dyed polyester, three new nylon products in our .Masland Energy main street commercial group and four new EnVision nylon styles in our high-end residential Masland and Fabrica brands

In our higher-end decorative brands, we have continued executing our growth strategy through 23 new introductions. This includes eight new styles in Décor by Fabrica, six in 1866 by Masland, and nine in our new 1866 All Seasons Collection. The 1866 All Seasons Collection is new for 2023 and includes 15 beautiful patterns for indoor or outdoor applications. Made with UV-treated fiber, which will not degrade from sunlight or weather, and available with a special exterior backing, these styles are especially well suited for the growing trend of outdoor living spaces.

In our hard surface lines, we introduced two new collections in TRUCOR Bravo and TRUCOR TYMBR Select. Bravo is a 5.5mm, 7"x60" SPC featuring great visuals, on-trend colors, and painted beveled edges. TYMBR Select is our second collection in the laminate segment and provides beautiful visuals and colors with an AC4 durability rating.

We are also excited about the continued expansion of our digital capability through our partnership with Broadlume. This program provides an excellent consumer experience, including integration with retailer websites, personalized online product visualization and easy online sample ordering. There are over 800 retailers in this program now, and we are seeing increased online activity, lead generation, and sample ordering," Frierson concluded.

The gross profit in the three months of the second quarter of 2023 was 26.7% of net sales compared to 19.2% of net sales in the same quarter of 2022. Our 2022 gross margin was negatively impacted by exorbitantly high pricing from our former primary raw material provider driven by their decision to exit the business. In 2023, we have diversified our raw material suppliers at lower comparative costs. Our cost of goods sold also reflected favorable operating results from our manufacturing operations primarily attributable to our east coast plant consolidations. Selling and administrative costs in the second quarter 2023 were higher as a percent of the lower net sales, 25.7% of net sales in 2023 compared to 22.5% in the second quarter of 2022.

The Company's receivables increased $4.5 million from the balance at fiscal year end 2022 due to higher comparative sales volume in the last month of each respective period. The net inventory value at second quarter end 2023 decreased $4.5 million from the fiscal year end 2022 balance due to lower inventory volume and values. Our accounts payable and accrued expenses increased by $6.2 million from prior year end. This increase was primarily the result of higher accounts payable related to increased production volume for higher comparative production demand. Our capital expenditures for the second quarter were $238 thousand bringing our year to date July 1, 2023 capitalexpenditure amount to $597 thousand.Total capital expenditures for the year are plannedat

$3.0 million. Interest expense was $1.8 million in the second quarter of 2023 compared to $1.1 million in the second quarter of 2022. The higher interest expense in 2023 was the result of increased borrowing and higher interest rates. Our debt decreased by $3.1 millionin the second quarter of 2023 drivenby decreased inventory and timing of expense payments and purchases. Our availability under our line of credit with our senior lending facility was $19.8 million at the end of the quarter.

For the month of July 2023, orderentry is slightlyhigher than the comparable periodin the prior year. We anticipate stronger demand in the later third quarter due to normal seasonality and the impact of new product launches.

This press releasecontains forward-looking statements. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management and the Companyat the time of such statements and are not guarantees of performance. Forward-looking statements are subjectto risk factors and uncertainties that could cause actual resultsto differ materially from those indicatedin such forward-looking statements. Such factors includethe 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, availability of raw material and transportation costs related to petroleum prices, the cost and availability of capital, integration of acquisitions, abilityto attract, developand retain qualifiedpersonnel and generaleconomic and competitive conditions related to the Company'sbusiness. Issues relatedto the availability and price of energymay adversely affectthe Company's operations. Additional information regardingthese and otherrisk factors and uncertainties may be found in the Company's filingswith 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 (loss) per share)

		Three Months Ended								Six Months Ended
		July 1,				June 25,				July 1,				June 25,
		2023				2022				2023				2022
NET SALES		$	74,009			$	83,698			$	141,093			$	161,273
Cost of sales			54,229				67,642				103,480				130,041
GROSS PROFIT			19,780				16,056				37,613				31,232
Selling andadministrative expenses			19,042				18,855				35,451				36,268
Other operating (income) expense, net			(234)				136				(166)				146
Facility consolidation andseverance expenses, net			719				-				1,768				-
OPERATING INCOME(LOSS)			253				(2,935)				560				(5,182)
Interest expense			1,849				1,081				3,707				2,196
Other (income) expense, net			3				-				(10)				(1)
Loss from continuing operations before taxes			(1,599)				(4,016)				(3,137)				(7,377)
Income tax provision (benefit)			21				3				34				(16)
Loss fromcontinuing operations			(1,620)				(4,019)				(3,171)				(7,361)
Loss from discontinued operations, net of tax			(106)				(468)				(313)				(483)
NET LOSS		$	(1,726)			$	(4,487)			$	(3,484)			$	(7,844)
BASIC EARNINGS (LOSS) PER SHARE
Continuing operations		$	(0.11)			$	(0.26)			$	(0.22)			$	(0.48)
Discontinued operations			(0.01)				(0.03)				(0.02)				(0.03)
Net loss		$	(0.12)			$	(0.29)			$	(0.24)			$	(0.51)
DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations		$	(0.11)			$	(0.26)			$	(0.22)			$	(0.48)
Discontinued operations			(0.01)				(0.03)				(0.02)				(0.03)
Net loss		$	(0.12)			$	(0.29)			$	(0.24)			$	(0.51)
Weighted-average sharesoutstanding:
Basic			14,808				15,225				14,742				15,184
Diluted			14,808				15,225				14,742				15,184

THE DIXIE GROUP, INC.
Consolidated Condensed BalanceSheets
(in thousands)

		July 1, 2023				December 31, 2022
ASSETS		(Unaudited)
Current Assets
Cash and cash equivalents		$	102			$	363
Receivables, net			29,497				25,009
Inventories, net			79,182				83,699
Prepaid andother current assets			13,424				10,167
Current assets of discontinued operations			294				641
Total Current Assets			122,499				119,879
Property, Plantand Equipment, Net			42,484				44,916
Operating LeaseRight-Of-Use Assets			19,273				20,617
Other Assets			15,533				15,982
Long-Term Assets of Discontinued Operations			1,566				1,552
TOTAL ASSETS		$	201,355			$	202,946
LIABILITIES ANDSTOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable		$	19,514			$	14,205
Accrued expenses			18,525				17,667
Current portionof long-term debt			4,245				4,573
Current portionof operating leaseliabilities			2,814				2,774
Current liabilities of discontinued operations			1,514				2,447
Total Current Liabilities			46,612				41,666
Long-Term Debt, Net			91,918				94,725
Operating LeaseLiabilities			17,163				18,802
Other Long-Term Liabilities			13,664				12,480
Long-Term Liabilities of Discontinued Operations			3,853				3,759
Stockholders' Equity			28,145				31,514
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	201,355			$	202,946

SOURCE: The Dixie Group

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