Dixie Group Has 37% Rise In Sales For 3rd Quarter

Wednesday, October 30, 2013

The Dixie Group, Inc. (NASDAQ:DXYN) reported financial results for the third quarter ended Sept. 28, including a steep rise in sales.

The company had sales of $90,210,000 and income from continuing operations of $1,432,000, or $0.

11 per diluted share, compared with sales of $65,822,000 and income from continuing operations of $269,000, or $0.02 per diluted share for the third quarter of 2012. On a non-GAAP basis, adjusted income from continuing operations was $2,165,000 or $0.15 per diluted share during the third quarter, compared to an adjusted income from continuing operations of $468,000, or $0.04 per diluted share in the third quarter of 2012.

Commenting on the results,  Daniel K. Frierson , chairman and chief executive officer, said, “The third quarter sales improvement was a robust 37 percent over the prior year’s quarter. Our residential products grew 35%, compared to the same period a year ago, and we believe that the residential market grew in the high single digits during the quarter and should continue to improve over the next year. Sales for our commercial products increased nearly 40% versus the third quarter of 2012. In contrast, we estimate that the commercial market was up in the low single digits. All of our product categories were up, showing the broad nature of our market momentum.

“Our growth, year-to-date, in excess of 27%, compared to the same period in 2012, is a result of the investments we have made in new products, processes, businesses and sales coverage. The residential growth was driven by strong results in our mass merchant area, continued growth of our Stainmaster® TruSoft® and SolarMax® products, and momentum gained in our wool business from the integration of the Robertex business purchased early in the third quarter. The marketplace continues to shift to softer products, as demonstrated by the growth of our Stainmaster® TruSoft® products. Sales for all of our residential brands were up for the quarter, and all retail channels continue to show momentum as we enter the fourth quarter. In the commercial market, we had excellent growth during the period with exceptional strength in our modular carpet tile products. Our strength in the store planning sector was of particular note during the period. Our continued successful launch of the SPEAK modular carpet tile and FIT office remodel collections positively impacted the quarter. These high performance products fulfill the need for high-styled modular and broadloom carpet products in today's market. Avant Contract, our newest commercial brand focused on the specified commercial office market, was launched during the quarter. Avant's edgier use of patterns, textures, and colors combined with the marketing campaign promoting local and regional artisans has been well received by the architectural and design community.

“Our investment in growth initiatives has positioned us to continue outperforming the industry at the high end of the marketplace. The expense impact to operating income of these growth initiatives was over $2.3 million for the quarter and approximately $5.3 millionyear-to-date. The specific operational initiatives to support our growth include the expansion of our yarn capacity in our Roanoke facility, the continued movement of goods to our Colormaster continuous dye facility in Calhoun and the installation of a yarn space dye line in our Colormaster facility. In addition, we are continuing to expand our wool machine tufted rug operation, acquired late last year, as well as beginning the integration of our Robertex and Carousel wool product lines, acquired during the third quarter. All of these initiatives increased our cost of sales by $1.6 million during the third quarter. We anticipate that these initiatives to support our growth will increase our cost of sales by approximately $1 million in the fourth quarter and $1.5 million in 2014. Sales expenses associated with the growth initiatives were higher during the quarter by $770,000 due to added marketing and sample costs to launch our newly acquired Carousel line within the Fabrica brand, incorporate Robertex products into the Masland Residential brand and launch the Avant commercial brand. We estimate these ongoing sales and marketing efforts will increase our selling and administrative expense by approximately $400 thousand in the fourth quarter and $900 thousand in 2014.

“The quarter had a gross profit margin of 24.5 percent and an operating income of two percent of net sales. On a non-GAAP adjusted basis, our gross profit margin was 26.2%, and our operating income was 4.6% for the third quarter. Our tax rate was positively affected by $795 thousand in prior years’ tax credits. The majority of these tax credits were for qualified research and development expenses. Our tax rate without these credits was 31.6% for the period.

“Working capital increased by $7,804,000 during the quarter due to higher receivables and inventory to support the higher level of sales. Inventory turns improved 13 percent versus the same quarter last year. Capital leases and expenditures were $4,450,000, while depreciation and amortization was $2,748,000 for the quarter. The fair value of capital assets acquired from the Robertex acquisition was $1,863,000. We anticipate capital leases and expenditures to be $13,500,000 and depreciation and amortization to be$10,500,000 for the entire year of 2013. Total debt increased $12,383,000 during the quarter, $3,769,000 of which was related to the Robertex acquisition. Availability under our credit lines was $26.4 million at quarter end.

“We are pleased to see continued industry growth in both the residential and commercial sectors in the third quarter as signs that the economy is on the mend. Despite potential macro-economic issues, we believe that conditions in the upper-end residential portion of our industry will continue to improve through 2014. The commercial market appears to be on an upward cycle with the highest growth in the modular carpet tile segment. We continue our commitment to growing our market share through innovative products, improvements in our processes and investment in our people.”

The company's loss from discontinued operations was $20,000, or $0.00 per diluted share, for the third quarter of 2013, compared with a loss from discontinued operations of $167,000, or $0.01 per diluted share, for the prior year. Including discontinued operations, the company reported a net income of $1,412,000, or $0.11 per diluted share, for the third quarter of 2013, compared with a net income of $102,000, or $0.01 per diluted share, for the year-earlier period.

Chattanooga Chamber Presents Calendar Of Events For Oct. 24-28

MON/24 2016  Want to Bid on a Contract? Get the Right Certification 9 a.m. –  Noon INCubator: 100 Cherokee Blvd. Part of Chattanooga Minority Enterprise Development Week, this event is geared toward businesses owned by minorities, women, veterans, service-disabled veterans, and other small business owners.  ... (click for more)

Earth Fare Opening At Site Of Former Harvest Grocery On Hixson Pike

Earth Fare, a fully stocked grocery store specializing in organic produce, will soon be opening at the former location of Harvest Grocery at 5414 Hixson Pike.   The store will also be able to sell beer after it received a license from the City Beer Board on Thursday morning.   Mareon McCrary, the store manager, has already taken the responsible vendors ... (click for more)

Domestic Assault Charge Dismissed Against Bobby Stone In Case Involving Mayor's Top Advisor; Stone Says Berke Had Inappropriate Relationship With His Wife; Says Berke And Fletcher Conspired To Arrest Him; Lacie Stone Says Charges Completely False

A charge of domestic assault was dismissed Friday morning against Bobby Stone in a case involving a top advisor to Mayor Andy Berke.  Afterward, Mr. Stone told reporters that the mayor had an inappropriate relationship with his wife, Lacie Stone. He also charged that Mayor Berke and Police Chief Fred Fletcher conspired to arrest him. Mr. Stone is expected to file ... (click for more)

Christopher Padgett Taken Into Custody

A Chattanooga man who went on the lam after cutting off his ankle monitor and failing to show up for the third day of his felony murder trial is back in custody. Christopher Padgett was arrested by Chattanooga Police in the 3200 block of South Street at 12:55 a.m.  He was taken into custody without incident and transported to the Hamilton County Jail for booking. ... (click for more)

Bobby Stone, Is It Really A Win?

It brought a smile to my face this morning when I saw where the case was thrown out of court against Mr. Stone and the domestic violence charge.  I have supported his cause from the beginning, but I do feel heartbreak because his personal life had to be tossed out there for all of us to see.   I truly hope and pray things turn around for him and his wife, while I feel ... (click for more)

Roy Exum: Kelly Could Win It

I am neither a sleuth nor an odds maker but I’d say there is about a one-in-three chance that Interim Hamilton County Department of Education Superintendent Kirk Kelly could become the permanent superintendent of our public schools next Thursday. I am assured something squirrelly is happening on our newly-seated school board. It has been seven months since the last superintendent ... (click for more)