The Dixie Group Reports Operating Income for Third Quarter of 2023
Highlights from the Third Quarter 2023:The gross profit margin for the three months of the third quarter of 2023 was 26.6% of net sales compared to 17.5% in the third quarter of 2022The net operating loss for the first nine months of 2023 was $354 thousand which included facility consolidation expenses in the amount of $2.3 millionOrder entry for the first five weeks of the fourth quarter is ...
Highlights from the Third Quarter 2023:
- The gross profit margin for the three months of the third quarter of 2023 was 26.6% of net sales compared to 17.5% in the third quarter of 2022
- The net operating loss for the first nine months of 2023 was
$354 thousand which included facility consolidation expenses in the amount of$2.3 million - Order entry for the first five weeks of the fourth quarter is up over the same period in the prior year
For the nine months ended
Commenting on the results,
The reduction of net sales for the quarter, down 4.4% from the same prior year period, was the result of constraints in the housing market driven by limited supply, high interest rates and continued inflationary pressure. We believe the overall flooring industry experienced a significantly higher reduction in year over year sales volume, indicating we are continuing to gain market share in our core markets. The residential flooring market remains weak as a result of lower volume in home resales and the deferral of home improvement projects.
We continue to manage the controllable aspects of our business through the implementation of productivity improvements, reduction of costs and headcount and restructuring assets where appropriate. All of these measures are focused on lowering expenses, decreasing debt and improving our financial results.
The positive results of our facility consolidation efforts over the last year were reflected in the improved gross margins in the third quarter. Our facility consolidations have better aligned production with demand and lowered costs through more efficient absorption of fixed costs and headcount reductions and we have experienced operational improvements in our manufacturing facilities.
In order to better position our company strategically, we will start operations on our own extrusion of nylon in the first quarter of 2024. We have taken this action to moderate the impact of any disruptions of raw materials in the future and to lower our costs.
In addition to lowering costs and improving operations over the last year, we continue to invest in our growth initiatives which have enabled us to gain market share.
Our first initiative has been a continued focus on the growth of our hard surface products by broadening our introductions with particular emphasis on innovative product offerings. Today's products include SPC, WPC, laminate and engineered wood with appropriate merchandising aimed at gaining retail floor space and market share.
Our decorative products initiative encompasses 1866 by Masland and Décor by Fabrica and includes a broad offering of domestic and imported products which allows us a wide assortment of wool and other decorative products that will appeal to even the most discerning customers. We continue to see growth in this category while the industry has not.
The third initiative has been an emphasis on innovative polyester products filling price points important to customers seeking affordable fashion. Our DuraSilk solution dyed program, merchandised as the "Elements Collection", has shown significant market growth this year.
In order to drive the performance of these growth initiatives, we have invested heavily in displays and samples throughout 2023. This investment has helped us outperform the market in sales but at a cost. We expect our selling expenses to return to a more reasonable level next year. Despite the investment in many new products, we were able to reduce debt by over
The industry is facing a difficult period as discretionary spending appears to be more focused on experiences rather than purchased goods. Despite this trend, the upper end of the market is outperforming the market in general and our focus on the upper end market continues to be a positive factor in our results. In the first five weeks of the fourth quarter, order entry is slightly better than a year ago." Frierson concluded.
The 9.1% increase in gross profit margin in the third quarter of 2023 as compared to the third quarter of 2022 was heavily impacted by the negative impact in 2022 resulting from our former primary raw material provider's decision to exit the business. The change in raw materials resulted in higher manufacturing costs and inefficiencies related to product development and testing in 2022. In 2023, we are seeing improved margins as the result of lower raw material costs and favorable operating results primarily due to our facilities consolidation efforts that were substantially completed in the first quarter of this year. Selling and administrative costs were slightly higher in the third quarter of 2023 as compared to the third quarter of 2022 primarily due to investment in growth initiatives in the current year.
The Company's net receivables increased
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, availability of 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 (loss) per share)
Three Months Ended | Nine Months Ended | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| $ | 68,576 | $ | 71,762 | $ | 209,669 | $ | 233,034 | |||||||||
Cost of sales | 50,341 | 59,225 | 153,821 | 189,266 | ||||||||||||
GROSS PROFIT | 18,235 | 12,537 | 55,848 | 43,768 | ||||||||||||
Selling administrative expenses | 18,743 | 18,606 | 54,195 | 54,875 | ||||||||||||
Other operating (income) expense, net | (147 | ) | 113 | (313 | ) | 258 | ||||||||||
Facility consolidation and severance expenses, net | 552 | 968 | 2,320 | 968 | ||||||||||||
OPERATING LOSS | (913 | ) | (7,150 | ) | (354 | ) | (12,333 | ) | ||||||||
Interest expense | 1,795 | 1,302 | 5,503 | 3,498 | ||||||||||||
Other income, net | (622 | ) | (2 | ) | (634 | ) | (3 | ) | ||||||||
Loss from continuing operations before taxes | (2,086 | ) | (8,450 | ) | (5,223 | ) | (15,828 | ) | ||||||||
Income tax provision (benefit) | 125 | (78 | ) | 159 | (94 | ) | ||||||||||
Loss from continuing operations | (2,211 | ) | (8,372 | ) | (5,382 | ) | (15,734 | ) | ||||||||
Loss from discontinued operations, net of tax | (183 | ) | (408 | ) | (496 | ) | (890 | ) | ||||||||
NET LOSS | $ | (2,394 | ) | $ | (8,780 | ) | $ | (5,878 | ) | $ | (16,624 | ) | ||||
BASIC EARNINGS (LOSS) PER SHARE: Continuing operations | $ | (0.15 | ) | $ | (0.55 | ) | $ | (0.36 | ) | $ | (1.04 | ) | ||||
Discontinued operations | (0.01 | ) | (0.03 | ) | (0.04 | ) | (0.05 | ) | ||||||||
Net loss | $ | (0.16 | ) | $ | (0.58 | ) | $ | (0.40 | ) | $ | (1.09 | ) | ||||
DILUTED EARNINGS (LOSS) PER SHARE: Continuing operations | $ | (0.15 | ) | $ | (0.55 | ) | $ | (0.36 | ) | $ | (1.04 | ) | ||||
Discontinued operations | (0.01 | ) | (0.03 | ) | (0.04 | ) | (0.05 | ) | ||||||||
Net loss | $ | (0.16 | ) | $ | (0.58 | ) | $ | (0.40 | ) | $ | (1.09 | ) | ||||
Weighted-averages hares outstanding: | ||||||||||||||||
Basic | 14,824 | 15,226 | 14,769 | 15,196 | ||||||||||||
Diluted | 14,824 | 15,226 | 14,769 | 15,196 | ||||||||||||
Consolidated Condensed Balance Sheets
(in thousands)
| 2022 | |||||||
ASSETS | (Unaudited) | |||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 173 | $ | 363 | ||||
Receivables, net | 28,074 | 25,009 | ||||||
Inventories, net | 79,940 | 83,699 | ||||||
Prepaid and other current assets | 12,187 | 10,167 | ||||||
Current assets of discontinued operations | 301 | 641 | ||||||
Total Current Assets | 120,675 | 119,879 | ||||||
Property, Plant and Equipment, Net | 40,952 | 44,916 | ||||||
Operating Lease Right-Of-Use Assets | 18,780 | 20,617 | ||||||
Other Assets | 15,393 | 15,982 | ||||||
Long-Term Assets of Discontinued Operations | 1,335 | 1,552 | ||||||
TOTAL ASSETS | $ | 197,135 | $ | 202,946 | ||||
LIABILITIES ANDSTOCKHOLDERS' EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 18,909 | $ | 14,205 | ||||
Accrued expenses | 18,851 | 17,667 | ||||||
Current portion of long-term debt | 3,197 | 4,573 | ||||||
Current portion of operating lease liabilities | 2,824 | 2,774 | ||||||
Current liabilities of discontinued operations | 1,360 | 2,447 | ||||||
Total Current Liabilities | 45,141 | 41,666 | ||||||
Long-Term Debt, Net | 92,696 | 94,725 | ||||||
Operating Lease Liabilities | 16,676 | 18,802 | ||||||
Other Long-Term Liabilities | 13,067 | 12,480 | ||||||
Long-Term Liabilities of Discontinued Operations | 3,627 | 3,759 | ||||||
Stockholders' Equity | 25,928 | 31,514 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 197,135 | $ | 202,946 | ||||
SOURCE:
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