'We continue to review our cost position' - Dixie Chairman

27 Oct '09

4 min read

The Dixie Group, Inc. reported financial results for the third quarter and nine months ended September 26, 2009. For the third quarter of 2009, the Company reported a loss from continuing operations of $2,017,000, or $0.16 per diluted share, compared with a loss from continuing operations of $732,000, or $0.06 per diluted share, for the third quarter of 2008. Sales for the third quarter of 2009 were $50,487,000, down 31% from $72,917,000 in the year-earlier quarter.

For the nine months ended September 26, 2009, the loss from continuing operations was $38,442,000, or $3.13 per diluted share, compared with income from continuing operations of $633,000, or $0.05 per diluted share for the nine-month period in 2008. Sales for the year-to-date period in 2009 were $150,698,000, down 32% from $220,794,000 reported in the prior-year period.

Results for the third quarter of 2009 were affected by $563,000 of pre-tax costs for facility consolidations and severance expenses related to the implementation of the Company's cost-reduction plans. Lower inventories in 2009 resulted in liquidations of LIFO inventory carried at lower costs established in prior years, increasing pre-tax income by $116,000 for the third quarter and $1,136,000 for the nine-month period of 2009. Results for the year to date in 2009 were also affected by the write-off of the Company's remaining goodwill, together with facility consolidation and severance expenses. For the first nine months of 2009, these expenses aggregated $33,701,000, of which $31,406,000 were non-cash.

Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, "The third quarter performance was similar to the second – with carpet sales down in the 30% range. We experienced improvement in the residential market during the quarter but continued weakness in the commercial sector. As we have stated previously, our objective is to reduce costs and return to profitability at the current business activity level.

“The actions taken beginning in 2008 to reduce costs have resulted in 28% fewer associates and should produce cost reductions of approximately $23 million to $25 million by 2010. We continue to review our cost position to insure our return to profitability.

“Our initial action under the cost reduction plan consisted primarily of consolidating our East Coast and West Coast tufting facilities along with other cost-cutting efforts. This program will be complete by year-end 2009.

“The second phase of our cost reduction initiative, as described in our second quarter earnings release, realigned our three residential units into one business unit with three distinct brands. This action is progressing well, and we expect to begin seeing savings from this realignment in the fourth quarter – with the full effect to be felt early next year.

“Our plans to reduce inventory and limit capital expenditures have continued. Inventories were down 7% in the third quarter compared with second quarter, and were down 21% compared with inventory levels at the beginning of the year. Capital expenditures for the year to date were $2.2 million, or 21% of depreciation and amortization. Earlier capital expenditure plans included approximately $3.2 million of equipment with new manufacturing technology, which we subsequently obtained under an operating lease. Total debt was reduced $2.7 million during the third quarter and $16.6 million year to date, due to lower working capital and capital expenditures.

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