The Dixie Group has released financial results for the second quarter.
“Sales in the second quarter started off strong but moderated throughout the period,” said Daniel Frierson, Dixie's chairman and CEO. “Our sales of $110 million were 1.9% ahead of the same quarter last year while the industry overall was down slightly. Excluding Atlas Carpet Mills, our sales growth for the quarter on a year-over-year basis was 4.6%.”
According to the report, sales for residential products declined .4% compared to the same quarter in the prior year, while the industry was down mid to low single digits. Sales of residential products started stronger in April but slowed down during the quarter relative to the company's performance a year ago. However, Dixie anticipated the residential remodeling market to have marginal growth for the remainder of the year. Dixie's increase in commercial product sales was 6.7% compared to the same period last year. Its Masland Commercial products had a sales increase of 17.7% on a year-over-year basis.
Dixie's gross profit for the quarter was 26.7% of net sales as compared to 24.7% the same quarter in the prior year and 24.3% in the first quarter. Gross profit improved as a result of improved operations following restructuring, and income of $459,000 from an adjustment to estimated acquisition-related contingent payments that was offset by continued higher-than-normal levels of quality, training and waste costs. Operating income was $2.2 million for the quarter as compared to $588,000 for the second quarter of 2014. Selling and administrative costs were 23.8% of net sales for the quarter as compared to 22.5% for the same quarter of 2014.
“We have higher sampling costs in both our residential and commercial businesses this year,” said Frierson. “The planned launch of new products for Atlas were delayed in 2014, so we have a very robust line of new products being introduced in 2015. In addition, our residential business has an unusually high sample expense from several additional national product launches.”
Also noted in the report is Dixie's facility consolidation and asset impairment expenses during the period were $875,000 as compared to $1.7 million a year ago. The company has completed its West Coast consolidation plan. According to Frierson, the only remaining significant East Coast manufacturing consolidation activities are in our Atmore and Saraland facilities. Other restructuring-related expenses, reflected in higher cost of sales, were higher than the normal levels of training, quality and waste costs for the period. These costs improved relative to the first quarter and we expect them to further decline in the second half of the year.
“We are announcing the consolidation of three of our existing divisional and corporate offices to a single facility located in Dalton,” said Frierson. “The consolidation plan is estimated to cost $716,000. The majority of the costs primarily relate to lease cancellation charges for the facilities we are vacating. Our plan is to continue to improve costs through emphasis on training and process improvements, thus regaining the quality and waste levels we had before the restructuring.”
Other impacts during the quarter were in the areas of higher medical costs. In the second quarter, Dixie continued to experience significantly higher costs associated with self-insured group medical plans. According to Frierson, the company will introduce an all new self-insured medical plan in 2016 to better control costs going forward.
Frierson added, “Sales for the first four weeks of the third quarter are ahead of the same quarter last year by 5%, while our carpet sales are ahead of last year by over 6% on a year-over-year basis. As always, we continue to be dedicated to supplying our customers with the most advanced style and design products of the highest quality.”
For more information, visit thedixiegroup.com.