The Dixie Group registers strong growth in Q3

10 Nov '11

6 min read

"Our gross profit, at 22.7% of net sales, was above that for the third quarter a year ago but below the year- to-date average of 24.0%. Our margins were compressed as a result of a one-time opportunity for added business in the residential mass merchant market as well as heavy shipments to national accounts within the commercial market. However, our selling, general and administrative expenses compared favorably at 20.8% of sales or 4.1 percentage points below last years' 24.9% of sales for the same quarter of the prior year.

"As we saw the industry slowdown continue from the second quarter into the third, we maintained a tight rein on running schedules, inventories and overtime; however, we experienced growth as compared to a relatively weaker quarter of the prior year. The fourth quarter of 2010 was significantly stronger than the earlier portion of that year, primarily due to sales growth in the mass merchant channel, and as a result we do not expect to continue such significant year-over-year growth as we head into the fourth quarter of 2011. Further, our fourth quarter this year will include both the week before and after Christmas as compared to the same quarter a year ago that only included one of those weeks.

"Capital expenditures were $4.2 million for the year-to-date, while depreciation and amortization was $7.3 million. We continue to underspend our depreciation and amortization levels. We anticipate total capital expenditures of $6.8 million for the year, the bulk of which will be used to expand our capacity and capabilities in our yarn operations. Total debt seasonally rose by $2.5 million during the quarter to $74.8 million.

"We established a new $90.0 million Senior Credit facility as well as increased the mortgage on our Susan Street facility by $5.5 million. The increased funds were used to buy out the $9.7 million in convertible subordinated debt, closing on October 5, shortly after the end of the quarter. In addition, this capital structure provides us with the financing necessary to grow over the next five years. The credit facility has no financial covenants as long as we maintain availability in excess of $10 million. The unused borrowing capacity under our credit lines was $22.6 million as of October 1, 2011.

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