The Dixie Group has reported Q2 financial results.

The company’s second quarter net sales were $105,316,000, 4.2% below second quarter of 2015 sales of $109,957,000. Income from continuing operations was $1,615,000, or $.10 per fully diluted share, for the second quarter as compared to income from continuing operations of $516,000, or $.03 per fully diluted share, in the second quarter of 2015. On a non-GAAP basis, which excludes restructuring expenses, the company earned $.12 per share for the second quarter as compared to $.07 per fully diluted share in the second quarter of 2015.

Commenting on the results, Daniel Frierson, chairman and chief executive officer, said, “April orders were seasonally stronger but lagged behind last year. Orders weakened further in May and June. Total carpet sales for the quarter were down 4.4% on a comparative year over year basis. In particular our commercial product sales were 8.1% below the prior year. We believe the commercial market was down slightly on a year over year basis. Residential product sales were 2.3% below the prior year period. Though our residential business was down as compared to the prior year’s quarter, we believe that we outperformed the residential market which we believe was down mid to low single digits. We have seen modest improvements in housing activity and continue to anticipate some increase in demand from demographic forces. We have not seen a corresponding improvement in the floorcovering market and continue to carefully evaluate our expectations for future sales growth. Our carpet sales over the first four weeks of the third quarter are down 11.9% as compared with the same period in the prior year. We believe that the entire floorcovering market has recently been impacted by what we believe is a temporary drop in consumer confidence."

Frierson added that despite the drop in sales compared to the year ago period, the company's operating margins improved slightly to 26.8%. "Furthermore, our operating margins improved 5.0% from the first quarter to the second quarter of 2016. We have lowered our cost structure through better running conditions as a result of moving production in house. Comparing the second quarter of 2016 to the first quarter of this year, we increased internal production by 23% even though we only had a total production increase of 18%. We have lower quality costs through tighter manufacturing tolerances in operations. We have improved material yields as we have improved quality and reduced waste. We have reduced medical expenses as a result of our new plan design. We continue to reduce staffing levels to increase our efficiency and respond to the lower sales volumes. Our selling and administrative costs improved from 23.8% of sales in the second quarter of last year to 23.1% of sales in the second quarter of 2016 due to cost reductions in all areas of sales and administration."

According to Frierson, Masland Contract is making a move to become a more complete resource to the commercial specifier with the introduction of Calibre High Performance LVT Flooring. After extensive research, Masland is preparing to launch a comprehensive offering of Wood and Abstract looks for use in various markets. The market targets include corporate, senior housing, multi family, higher education, retail and hospitality.

"In the residential market, our Dixie Home, Masland and Fabrica brands provide a ‘good, better, best’ for consumers looking for unique, quality carpets and rugs," said Frierson. "Our investment in tufting technology allows us to provide distinctive products to support the success of flooring dealers and interior designers. Each brand speaks to the customer and addresses their personal tastes, whether traditional, transitional or urban modern. For example, Masland Carpets has recently launched Batik and Lynx which create an artistic texture with edgy styling, bold patterns that produce the look of an Artisan hand-crafted fabric for the floor. The sleek styling and playful randomness are formed from the tonal effect of the cut and loop construction. The bold shapes of these patterns are perfectly suited in traditional and contemporary settings offering distinct personality to any room."

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