Residential carpet sales down 12.1% at Dixie Group
November 01, 2008 - United States Of America
The Dixie Group, Inc. reported financial results for the third quarter and nine months ended September 27, 2008.
For the third quarter, the Company reported a loss from continuing operations of $732,000, or $0.06 per diluted share, compared with income from continuing operations of $2,239,000, or $0.17 per diluted share, for the third quarter of 2007.
Sales for the third quarter of 2008 were $72,917,000, down 11% from sales of $82,385,000 in the year-earlier quarter. For the nine months ended September 27, 2008, income from continuing operations was $633,000, or $0.05 per diluted share, compared with income from continuing operations of $5,032,000, or $0.39 per diluted share, for the same period in 2007. Sales for the year-to-date period in 2008 were $220,794,000, down 8% from $241,278,000 reported in the prior-year period.
Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, "The third quarter began with another announcement of significantly higher raw material costs. We increased our selling prices to reflect the June and July raw material price increases; however, the higher selling prices were not fully implemented until the fourth quarter of this year."
"We also were faced with unit volume decreases that led to lower operating efficiencies and higher unabsorbed fixed costs. Our carpet sales dollars declined 10.7% in the third quarter of this year, compared with the third quarter of the prior year, with residential carpet sales down 12.1% and commercial carpet sales down 8.5%."
In response to the difficult economic environment, we developed and began implementing a plan to consolidate certain of our operations to better utilize our facilities and reduce costs. The plan consolidates our tufting operations in North Georgia into our Atmore, Alabama, facility and our tufting, dyeing and finishing operations in Santa Ana, California, into one facility.
"We are also making organizational changes to reduce staff and expenses, where such changes will not compromise our ability to grow or affect our leadership position in high-end markets. The facility consolidations and organizational changes should reduce total employment by approximately 6% on top of the 9% staffing reduction that took place during the second quarter.
"The aggregate cost to complete the consolidations and make the organizational changes is expected to be approximately $3.0 million to $3.5 million."
These costs will have a negative impact on our results until we complete the consolidations in the first quarter of next year, but these actions should reduce ongoing fixed costs and improve operating efficiencies in both our East Coast and West Coast operations, while leaving adequate capacity for growth.
"The effects of these initiatives, together with higher selling prices in place during the fourth quarter of 2008 and anticipated decreases in raw material costs, are expected to return our operations to profitable levels next year and position us to take full advantage of improvement in industry conditions when they occur," Frierson concluded.
In October of this year the Company amended its $84.6 million senior loan and security agreement to extend its term to May 11, 2013. The available credit and structure of the facility are substantially unchanged, but interest rates applicable to the facility were increased approximately 0.5% to current market rates.
During the third quarter of this year, the Company purchased 237,186 shares of its Common Stock at an average price of $5.97 per share, pursuant to the Company's previously authorized stock repurchase program. At the end of the third quarter, the Company discontinued its 10b-18 Common Stock repurchase plan to maintain a conservative capital structure during this period of uncertainty.
Additional repurchases of the Company's Common Stock may be made based on management's review of developing economic conditions.
The Company's loss from discontinued operations was $101,000, or $0.01 per diluted share, for the third quarter of 2008, compared with income from discontinued operations of $9,000, or $0.00 per diluted share, for the third quarter of 2007. Including discontinued operations, the Company reported a net loss of $833,000, or $0.07 per diluted share, for the third quarter of 2008 compared with net income of $2,248,000, or $0.17 per diluted share, for the third quarter of 2007.
For the nine-month period in 2008, the Company's loss from discontinued operations was $167,000, or $0.01 per diluted share, compared with a loss of $175,000, or $0.02 per diluted share, in the prior-year period. Including discontinued operations, the Company reported net income of $466,000, or $0.04 per diluted share, for the nine months ended September 27, 2008, compared with net income of $4,857,000, or $0.37 per diluted share, for the year-earlier period.
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 and Dixie Home brands.