The Dixie Group Reports Third Quarter 2012 Results

  The Dixie Group Reports Third Quarter 2012 Results

Business Wire

CHATTANOOGA, Tenn. -- November 09, 2012

The Dixie Group, Inc. (NASDAQ:DXYN) today reported financial results for the
third quarter ended September 29, 2012. In the third quarter of 2012, the
company had sales of $65,822,000 and income from continuing operations of
$269,000, or $0.02 per diluted share, compared with income from continuing
operations of $22,000, or $0.00 per diluted share for the third quarter of
2011. Net sales decreased by $3,785,000 for the fiscal third quarter of 2012,
compared with the third quarter of 2011, primarily due to a one-time sales
promotion in the prior period. Year-to-date sales were $195,238,000, with a
loss from continuing operations of $240,000 or $0.02 per diluted share,
compared with sales of $204,761,000 and income from continuing operations of
$1,474,000 or $0.11 per diluted share, from the year-ago period. When
adjusting for the number of weeks in the two periods, net sales for the
year-to-date were 2.4% below the same period of 2011.

Commenting on the results, Daniel K. Frierson, chairman and chief executive
officer, said, “We continued our strong residential growth in the quarter with
6.5% increase in product sales, excluding a one-time promotional special in
the prior year. Each of our residential brands had nice increases through the
retail and design channels. The only area of decline was in our mass merchant
category, due primarily to the non-repeating one-time promotion in 2011. Our
residential product sales, including mass merchants, declined 2.9% relative to
a slight growth for the industry. Our commercial sales during the period were
hurt by a slow start to the quarter with a sales decline of 10.6% relative to
the industry growth in the low-single digits. We are excited by our new
management team led by Lee Martin, who came on board during the quarter, and
who has developed new growth plans for our commercial business. Our business
started the quarter slower but strengthened throughout the period and has
continued to be stronger during October.

“Our focus on new products to drive growth has continued with our new Speak
Collection of high-performance modular carpet tile being introduced during the
period. This, along with the continued success of our Chrome Collection in the
commercial marketplace, has given us confidence in seeing stronger results in
the year ahead. Project activity in the commercial market has been exceeding
expectations. The launch of Stainmaster^® TruSoft™ during the quarter is
proving successful across all of our residential product lines and market
categories. We are reaping the rewards of being one of the first two
participants to market with this revolutionary breakthrough in soft fiber
technology. We continued double digit growth in the wool market, led by the
introduction of our line of Permaset wool products which give the designer
unlimited color flexibility. We have spent heavily this year with increased
investment in new product development and sampling of products to our
customers. We remain committed to being the industry leader in style and
design and this investment enables us to continue outperforming the industry.

“Margins for the third quarter have improved relative to the prior year with a
gross profit margin of 25.2%, compared to 22.7% in the prior-year period. This
has been due to better quality and efficiency. Most notable have been the
improvements in our Atmore and Eton tufting operations as we have simplified
and streamlined these operations by establishing dedicated tufting facilities
to focus on specific segments of the market. We spent over $300,000 during the
quarter to implement this change and over $1 million year-to-date. Our
selling, general and administrative expenses were 24.0% of net sales for the
quarter, compared to 20.8% in the year-ago period. This higher expense is
partially due to our heavy investment this year in added sampling expenses
with the launch of the line of Stainmaster^® TruSoft™ products as we continue
to pursue above industry growth.

“Capital expenditures were $2.0 million year-to-date while our depreciation
and amortization were $7.1 million year-to-date. Including the acquisition of
the Colormaster continuous dye-house we purchased early in November, we
anticipate capital investments to be approximately $9.5 million for the year.
The acquisition of the Colormaster facility will have a negative effect on
earnings during the transition period as we ramp up production to take
advantage of the more efficient dye capabilities of the facility. Our working
capital rose slightly during the quarter, primarily due to higher accounts
receivable. Our total debt was $75.8 million and our availability under our
credit lines stood at $20.2 million as of quarter end.

“The fourth quarter is coming in stronger than the weaker summer months as we
have seen positive signs in the housing market beginning to take effect. We
still believe that the upper-end residential market will continue to
outperform the market in general. We have renewed vigor in the commercial
market under our new management team and with our new line of Speak modular
carpet tile products. Our continued emphasis on operational efficiency and the
coming integration of the Colormaster facility will help us to expand our
product offerings to position us for continued growth,” Frierson concluded.

The company's loss from discontinued operations was $167,000, or $0.01 per
diluted share, for the third quarter of 2012, compared with a loss from
discontinued operations of $65,000, or $0.00 per diluted share, for the prior
year. Including discontinued operations, the company reported a net income of
$102,000, or $0.01 per diluted share, for the third quarter of 2012, compared
with net loss of $43,000, or $0.00 per diluted share, for the year-earlier
period. The company's loss from discontinued operations was $272,000, or $0.02
per diluted share, for the nine months ended September 29, 2012, compared with
a loss from discontinued operations of $127,000, or $0.01 per diluted share,
for the nine-month period ended October 1, 2011. Including discontinued
operations, the company reported a net loss of $512,000 or $0.04 per diluted
share, for the first nine months of 2012, compared with a net income of
$1,347,000, or $0.10 per diluted share, for the prior period.

A listen-only Internet simulcast and replay of Dixie's conference call may be
accessed with appropriate software at the Company's website or at
www.earnings.com. The simulcast will begin at approximately 11:00a.m. Eastern
Time on November 9, 2012. 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) 312-1446 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 4342839 when prompted for the access code. For
further information, please see our updated investor presentation at
www.thedixiegroup.com and click on the Investor Relations tab; the file is
listed under Overview - Featured Reports.

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, and Masland Contract
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 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, 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 DIXIE GROUP, INC.

Consolidated Condensed Statements of Operations

(unaudited; in thousands, except earnings per share)
                                                    
                    Three Months Ended          Nine Months Ended
                       September 29,   October 1,   September      October 1,
                    2012           2011        29,           2011
                                                    2012
NET SALES              $  65,822      $ 69,607     $  195,238    $ 204,761
Cost of sales        49,265        53,834     147,260      155,695   
GROSS PROFIT           16,557          15,773       47,978         49,066
Selling and
administrative         15,785          14,493       46,530         44,830
expenses
Other operating
(income) expense,      (48        )    102          48             (349      )
net
Facility
consolidation and    —             —          —            (563      )
severance
expenses, net
OPERATING INCOME       820             1,178        1,400          5,148
Interest expense       781             904          2,270          2,736
Other income, net      (189       )    (21      )   (281       )   (26       )
Refinancing          —             317        —            317       
expenses
Income (loss) from
continuing             228             (22      )   (589       )   2,121
operations before
taxes
Income tax
provision            (41        )   (44      )  (349       )  647       
(benefit)
Income (loss) from
continuing             269             22           (240       )   1,474
operations
Loss from
discontinued         (167       )   (65      )  (272       )  (127      )
operations, net of
tax
NET INCOME (LOSS)    $  102        $ (43    )  $  (512    )  $ 1,347   
                                                                   
BASIC EARNINGS
(LOSS) PER SHARE:
Continuing             $  0.02         $ 0.00       $  (0.02   )   $ 0.11
operations
Discontinued         (0.01      )   (0.00    )  (0.02      )  (0.01     )
operations
Net income (loss)    $  0.01       $ (0.00  )  $  (0.04   )  $ 0.10    
                                                                   
DILUTED EARNINGS
(LOSS) PER SHARE:
Continuing             $  0.02         $ 0.00       $  (0.02   )   $ 0.11
operations
Discontinued         (0.01      )   (0.00    )  (0.02      )  (0.01     )
operations
Net income (loss)    $  0.01       $ (0.00  )  $  (0.04   )  $ 0.10    
                                                                   
Weighted-average
shares
outstanding:
Basic                  12,650          12,596       12,630         12,582
Diluted              12,713        12,648     12,630       12,632    

                                                           
THE DIXIE GROUP, INC.

Consolidated Condensed Balance Sheets

(in thousands)
                                                               
                                            September 29,  December 31,
                                               2012            2011
ASSETS                                         (Unaudited)
Current Assets
Cash and cash equivalents                      $  114          $   298
Receivables, net                               31,990          29,173
Inventories                                    70,991          63,939
Other                                        8,746         7,589
Total Current Assets                           111,841         100,999
                                                               
Property, Plant and Equipment, Net             63,266          67,541
Other Assets                                 14,617        14,403
TOTAL ASSETS                                 $  189,724    $   182,943
                                                               
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses          $  31,873       $   31,853
Current portion of long-term debt            3,058         2,729
Total Current Liabilities                      34,931          34,582
                                                               
Long-Term Debt
Senior indebtedness                            58,808          52,806
Mortgage note payable                          9,588           10,141
Equipment notes payable                        1,847           2,061
Capital lease obligations                      2,483           349
Deferred Income Taxes                          3,547           4,804
Other Liabilities                              14,328          13,815
Stockholders' Equity                         64,192        64,385
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $  189,724    $   182,943
                                                                   

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.

The nine months of 2012 contained 39 operating weeks, compared with 40
operating weeks in the nine months of 2011. Percentage changes in net sales
have been adjusted to reflect the comparable number of weeks in the reporting
periods.

                               
                               Nine Months Ended
                               September 29,  October 1,
                                 2012            2011
Net Sales Adjusted:                            
Weeks in period                  39              40
                                                 
Net sales as reported            $  195,238      $ 204,761
Adjusted for weeks              —             (4,711    )
Non-GAAP net sales as adjusted  $  195,238    $ 200,050 
                                                           

Further non-GAAP reconciliation data, including Non-GAAP Adjusted Operating
Income, Adjusted EBIT and Adjusted EBITDA, are available at
www.thedixiegroup.com under the Investor Relations section.

Contact:

The Dixie Group, Inc.
Jon Faulkner, 706-876-5814
Chief Financial Officer
jon.faulkner@dixiegroup.com
 
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