The Dixie Group Reports Net Income for Second Quarter of 2021
The Dixie Group, Inc. reported a remarkable 72.3% increase in net sales for Q2 2021, reaching $105 million, compared to $60.8 million in Q2 2020. The net income stood at $3.3 million, a significant turnaround from a net loss of $7 million in the prior year. Residential floorcovering sales surged 99.5%, driven by home sales and remodeling growth. However, the company faced challenges, including a ransomware attack and the impending sale of its commercial business, indicating a strategic shift towards residential markets. Gross profit margin improved to 24.6%.
- Net sales increased by 72.3% year-over-year to $105 million.
- Net income reached $3.3 million, a recovery from a $6.98 million loss a year prior.
- Residential floorcovering sales surged by 99.5% compared to the same quarter in 2020.
- Gross profit margin improved to 24.6% from 20.1% in Q2 2020.
- Ransomware attack negatively impacted operations and communications.
- Commercial floorcovering sales decreased by approximately 8% from the previous year.
Highlights from Second Quarter 2021 Results:
- Net Sales of
$105 million - Net income of
$3.3 million - Strong order activity throughout the quarter
DALTON, GA / ACCESSWIRE / August 5, 2021 / The Dixie Group, Inc. (NASDAQ:DXYN) today reported financial results for the quarter ended June 26, 2021. For the second quarter of 2021, the Company had net sales of
Commenting on the results, Daniel K. Frierson, Chairman and Chief Executive Officer, said, "During the second quarter of 2021 we were able to build on the momentum we experienced through the end of the first quarter.
Overall, net sales increased
Our second quarter was punctuated by three major events, two of which will have a significant impact on our future.
First, a ransomware attack, which occurred in mid-April, impacted our operations and both internal and external communications. Certainly, our April results were negatively impacted but we were able to return to more normal operations later in the quarter with limited impact on our customers.
Second, the sale of the STAINMASTER® brand to Lowes and the withdrawal of the brand from independent retailers as well as the price changes by Invista will have a long lasting impact on our business. We are executing a plan to enhance our brand and competitive offerings to the market.
Lastly, we have entered into an agreement in principle for the sale of our commercial business. This sale would represent a major change of focus for our Company. We are currently negotiating terms and conditions of the proposed sale. Upon successful completion of the sale, our entire focus would be solely on the residential floorcovering market where our well known and respected brands continue to gain market share.
While many of our planned second quarter product launches were delayed by the ransomware attack, we were still able to launch some key products into the residential market. On the soft surface side, we launched four new TECHnique patterns in our Masland and Fabrica divisions. These are high-end patterns tufted on the latest tufting innovation in the market, and produced with EnVision66™ fiber. We also launched several other EnVision66™ products across all divisions, bringing our total EnVision66™ offering to 31 styles, with additional styles coming during the third quarter. In April, we unveiled our new EnVisionSD Pet Solutions™ program with five new special edition styles expected to begin hitting retail stores this summer. EnVisionSD Pet Solutions™ styles are produced with a solution dyed nylon 6,6 fiber which has built in stain resistance and stands up to the toughest stains and wear and tear from today's active families and their pets.
One key event for the industry during the second quarter was the sale of the STAINMASTER® brand by Invista to Lowe's. Over the last couple of years, our Company had begun developing alternative fiber offerings in order to diversify our sources of raw materials and help prepare for such an eventuality. We had also introduced Envision66™ products as our new brand to the industry. In response to this event, we quickly developed a multifaceted strategy to help our specialty retail customers transition their showrooms from the STAINMASTER® brand to our EnVision66™ and EnVisionSD Pet Solutions™ brands. A key component of this effort was the development of the Premier Flooring Center™ (PFC). The PFC was developed as a non-disruptive, turnkey solution for existing STAINMASTER® Flooring Center retailers. The PFC offers a retail friendly selling system for upselling to better goods and focuses on the benefits of nylon 6,6. It also provides new signage, labels, and in store merchandising materials to create a fresh new look and feel in these showrooms. We will be installing the PFC in about 200 stores during this summer.
On the hard surface side, we introduced two new key programs in our luxury vinyl category. TRUCOR™ 3DP, a new collection of 12 wood and tile visuals in our TRUCOR™ family, is built on a SPC core, and features an enhanced digital print technology. These beautiful products deliver high definition visuals, an AC5 scratch resistance rating for exceptional durability, and virtually eliminate the pattern repeat found in most LVF products currently on the market. We also introduced TRUCOR™ Applause, a SPC offering with eight SKUs made in the USA. This is our first domestically sourced luxury vinyl program, and we are seeing great reception to the competitive price points and simplified supply chain for this offering.
Our commercial business and the commercial market continues to be adversely impacted by COVID-19. Our sales of commercial floorcovering products during the quarter were down approximately
Our gross profit as a percentage of net sales was
Our residential floorcovering sales and orders for the first 5 weeks of the quarter have continued at a very strong pace, well ahead of the same period a year ago. Both residential sales and orders are approximately
A listen-only Internet simulcast and replay of Dixie's conference call may be accessed with appropriate software at the Company's website at https://investor.dixiegroup.com. The simulcast will begin at approximately 10:00 a.m. Eastern Time on August 5, 2021. A replay will be available approximately two hours later and will continue for approximately 30 days. If Internet access is unavailable, a listen-only telephonic conference will be available by dialing (877) 407-0989 and entering 13721095 at least 10 minutes before the appointed time. The Dixie Group, Inc. is a leading marketer and manufacturer of carpet and rugs to higher-end residential and commercial customers through the Fabrica International, Masland Carpets, Dixie Home, AtlasMasland and Dixie International brands.
This press release contains forward-looking statements. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management and the Company at the time of such statements and are not guarantees of performance. Forward-looking statements are subject to risk factors and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Such factors include the levels of demand for the products produced by the Company. Other factors that could affect the Company's results include, but are not limited to, availability of raw material and transportation costs related to petroleum prices, the cost and availability of capital, integration of acquisitions, ability to attract, develop and retain qualified personnel and general economic and competitive conditions related to the Company's business. Issues related to the availability and price of energy may adversely affect the Company's operations. Additional information regarding these and other risk factors and uncertainties may be found in the Company's filings with the Securities and Exchange Commission. The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise.
CONTACT:
Allen Danzey
Chief Financial Officer
706-876-5865
allen.danzey@dixiegroup.com
THE DIXIE GROUP, INC.
Consolidated Condensed Statements of Operations
(unaudited; in thousands, except earnings (loss) per share)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 26, 2021 | June 27, 2020 | June 26, 2021 | June 27, 2020 | |||||||||||||
NET SALES | $ | 104,833 | $ | 60,824 | $ | 191,134 | $ | 141,401 | ||||||||
Cost of sales | 79,058 | 48,580 | 145,885 | 110,164 | ||||||||||||
GROSS PROFIT | 25,775 | 12,244 | 45,249 | 31,237 | ||||||||||||
Selling and administrative expenses | 21,043 | 16,523 | 41,157 | 36,920 | ||||||||||||
Other operating expense, net | 33 | 100 | 35 | 8 | ||||||||||||
Facility consolidation and severance expenses, net | 71 | 1,246 | 96 | 1,270 | ||||||||||||
OPERATING INCOME (LOSS) | 4,628 | (5,625 | ) | 3,961 | (6,961 | ) | ||||||||||
Interest expense | 1,242 | 1,357 | 2,571 | 2,642 | ||||||||||||
Other income, net | - | (3 | ) | (1 | ) | (7 | ) | |||||||||
Income (loss) from continuing operations before taxes | 3,386 | (6,979 | ) | 1,391 | (9,596 | ) | ||||||||||
Income tax benefit | (24 | ) | - | (51 | ) | (4 | ) | |||||||||
Income (loss) from continuing operations | 3,410 | (6,979 | ) | 1,442 | (9,592 | ) | ||||||||||
Loss from discontinued operations, net of tax | (61 | ) | (81 | ) | (121 | ) | (157 | ) | ||||||||
NET INCOME (LOSS) | $ | 3,349 | $ | (7,060 | ) | $ | 1,321 | $ | (9,749 | ) | ||||||
BASIC EARNINGS (LOSS) PER SHARE: | ||||||||||||||||
Continuing operations | $ | 0.22 | $ | (0.46 | ) | $ | 0.09 | $ | (0.63 | ) | ||||||
Discontinued operations | 0.00 | (0.01 | ) | (0.01 | ) | (0.01 | ) | |||||||||
Net income (loss) | $ | 0.22 | $ | (0.47 | ) | $ | 0.08 | $ | (0.64 | ) | ||||||
DILUTED EARNINGS (LOSS) PER SHARE: | ||||||||||||||||
Continuing operations | $ | 0.21 | $ | (0.46 | ) | $ | 0.09 | $ | (0.63 | ) | ||||||
Discontinued operations | 0.00 | (0.01 | ) | (0.01 | ) | (0.01 | ) | |||||||||
Net income (loss) | $ | 0.21 | $ | (0.47 | ) | $ | 0.08 | $ | (0.64 | ) | ||||||
Weighted-average shares outstanding: | ||||||||||||||||
Basic | 15,119 | 15,331 | 15,102 | 15,344 | ||||||||||||
Diluted | 15,249 | 15,331 | 15,232 | 15,344 | ||||||||||||
THE DIXIE GROUP, INC.
Consolidated Condensed Balance Sheets
(in thousands)
| June 26, | December 26, | |||||||
| 2021 | 2020 | |||||||
ASSETS | (Unaudited) | |||||||
| Current Assets | ||||||||
Cash and cash equivalents | $ | 2,398 | $ | 1,920 | ||||
Receivables, net | 51,470 | 37,716 | ||||||
Inventories, net | 91,384 | 85,399 | ||||||
Prepaids and other current assets | 5,562 | 8,296 | ||||||
Total Current Assets | 150,814 | 133,331 | ||||||
Property, Plant and Equipment, Net | 55,039 | 57,904 | ||||||
Operating Lease Right-Of-Use Assets | 20,330 | 22,074 | ||||||
Other Assets | 19,819 | 19,559 | ||||||
TOTAL ASSETS | $ | 246,002 | $ | 232,868 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 27,733 | $ | 19,058 | ||||
Accrued expenses | 31,669 | 25,965 | ||||||
Current portion of long-term debt | 4,502 | 6,116 | ||||||
Current portion of operating lease liabilities | 3,271 | 3,323 | ||||||
Total Current Liabilities | 67,175 | 54,462 | ||||||
Long-Term Debt, Net | 73,431 | 72,041 | ||||||
Operating Lease Liabilities | 17,775 | 19,404 | ||||||
Other Long-Term Liabilities | 22,019 | 23,170 | ||||||
Stockholders' Equity | 65,602 | 63,791 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 246,002 | $ | 232,868 | ||||
Use of Non-GAAP Financial Information:
(in thousands)
The Company believes that non-GAAP performance measures, which management uses in evaluating the Company's business, may provide users of the Company's financial information with additional meaningful bases for comparing the Company's current results and prior period results, as these measures reflect factors that are unique to one period relative to the comparable period. However, the non-GAAP performance measures should be viewed in addition to, not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States. In considering our supplemental financial measures, investors should bear in mind that other companies that report or describe similarly titled financial measures may calculate them differently. Accordingly, investors should exercise appropriate caution in comparing our supplemental financial measures to similarly titled financial measures reported by other companies.
| Non-GAAP Summary | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 26, 2021 | June 27, 2020 | June 26, 2021 | June 27, 2020 | |||||||||||||
Income (loss) as reported | $ | 3,349 | $ | (7,060 | ) | $ | 1,321 | $ | (9,749 | ) | ||||||
Loss from discontinued operations, net of tax | (61 | ) | (81 | ) | (121 | ) | (157 | ) | ||||||||
Income (loss) from continuing operations | 3,410 | (6,979 | ) | 1,442 | (9,592 | ) | ||||||||||
Corporate Office Consolidation | - | (3 | ) | - | 5 | |||||||||||
Profit Improvement Plans | 71 | 230 | 96 | 246 | ||||||||||||
COVID-19 Recovery Plan | - | 1,019 | - | 1,019 | ||||||||||||
Total All Plans | 71 | 1,246 | 96 | 1,270 | ||||||||||||
Income (loss) | $ | 3,481 | $ | (5,733 | ) | $ | 1,538 | $ | (8,322 | ) | ||||||
Diluted shares | 15,249 | 15,331 | 15,232 | 15,344 | ||||||||||||
Adjusted earnings (loss) per diluted share | $ | 0.22 | $ | (0.37 | ) | $ | 0.10 | $ | (0.54 | ) | ||||||
SOURCE: The Dixie Group
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FAQ
What were the net sales for DXYN in Q2 2021?
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What impact did the ransomware attack have on DXYN?
What is the gross profit margin reported by DXYN for Q2 2021?
