The Dixie Group Reports Second Quarter 2013 Results
The Dixie Group, Inc. (NASDAQ:DXYN) reported financial results for the second quarter ended June 29, 2013. In the second quarter of 2013, the Company had sales of $83,617,000 and income from continuing operations of $1,677,000, or $0.13 per diluted share, compared with sales of $66,566,000 and a loss from continuing operations of $404,000, or $0.03 per diluted share for the second quarter of 2012.
Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, “The second quarter was one of strong performance both residentially and commercially. Dixie had a year-over-year sales improvement of 26% with sales growth in all areas of the business. Our sales growth in the residential business was 27% as compared to the same period a year ago. We believe the residential market grew during the quarter in the high single digits with the market strengthening as the quarter progressed. It appears that the residential carpet market is now being positively impacted by the increase in the housing sector that began in 2012. Sales for our commercial products increased 21% versus the second quarter of 2012. This increase was in comparison to the commercial market being up only slightly in our estimation.
“Our continued growth in excess of 20% in 2013 is a result of the investments we have made over the last several years in new products and sales coverage. The residential growth was a combination of strong results in our mass merchant area, continued growth of our Stainmaster TruSoft and SolarMax products, strength in our wool business and momentum gained from the integration of the Gulistan products purchased late last year. The shift to softer products, as demonstrated by the growth of our Stainmaster TruSoft products, continued throughout the quarter. In addition, the success of our high performance Stainmaster SolarMax products has led us to expand manufacturing capacity to fulfill rising demand. Sales for all of our residential brands were up for the quarter and all retail channels are showing strength early in the third quarter. In the commercial market, we had growth in both our modular carpet tile and broadloom product categories. Our market strength in the store planning sector was of particular note during the quarter. The response to our SPEAK modular carpet tile and FIT office remodel collections has been very favorable. These high performance products give us added breadth in our line and fulfill the need for high styled modular and broadloom carpet products in today's market. We implemented the planned expansion of both our residential and commercial sales forces in the first half of the year to give us more strategic focus in select markets. Avant Contract, our newest commercial brand, launched its first series of products during the quarter. The Avant Contract brand is primarily focused on the fastest growing commercial segment, the modular office market. The initial impressions of Avant's edgier use of patterns, textures and colors combined with the marketing campaign promoting local and regional Artisans is being well received by the Architectural and Design community. We expect Avant to positively impact our sales in 2014. Our continued investment in products, processes and people has positioned us to continue to outperform the industry at the high end of the marketplace.
“The quarter had a gross profit margin of 26.7% and an operating income of 3.9% of net sales. Our growth initiatives begun in 2012 resulted in increased operating utilization but also added expense as we responded quickly to the increased demand. The additional costs from our Roanoke yarn expansion, the Crown Rug and Colormaster continuous dye house integrations, and the higher sampling costs as we accelerated our investment in new products in 2013, negatively impacted our operating income by over $1 million during the quarter. Our tax rate was 27% for the period.
“Working capital increased by $8,851,000 during the quarter due to higher receivables and inventory to support our higher level of sales. Our inventory turns improved 11% versus the same period in the prior year. Capital leases and expenditures were $3,441,000, while depreciation and amortization was $2,559,000 for the period. We anticipate capital leases and expenditures to be $13,500,000 and depreciation and amortization to be $10,300,000 for the entire year of 2013. Total debt increased $7,873,000 during the quarter. Availability under our credit lines was $25.0 million at quarter end. Subsequent to quarter end, we amended and extended our senior credit facility to accommodate the growth in working capital as we continue to grow our sales. In addition, in early July we completed the acquisition of Robertex Associates, a maker of fine wool products.
“We are pleased to see residential industry growth in the second quarter as this signals to us that the recovery in the housing sector has finally impacted the carpet market. Despite potential macro-economic issues, we believe that conditions in the upper-end residential portion of our industry will continue to improve during 2013. The commercial market appears to be stable with the highest growth in the modular carpet tile segment. We continue our commitment to growing our market share with innovative products, refinement of our manufacturing processes and investment in our people,” Frierson concluded.
The Company's loss from discontinued operations was $32,000, or $0.00 per diluted share, for the second quarter of 2013, compared with a loss from discontinued operations of $29,000, or $0.00 per diluted share, for the prior year. Including discontinued operations, the Company reported a net income of $1,645,000, or $0.13 per diluted share, for the second quarter of 2013, compared with a net loss of $433,000, or $0.03 per diluted share, for the year-earlier period.
