Q1 2020 Earnings Call
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Good day and welcome to the Dixie Group Inc., 2021st quarter earnings Conference call.
Todays call is being recorded.
Hi for opening remarks, and introduction I would like to turn over to chairman and Chief Executive Officer. The entire said. Please go ahead.
Thank you Michelle.
Come to our first quarter conference call.
With me Alan Dancy, our Chief Financial Officer.
John.
Vice president of strategic initiatives.
Our safe Harbor statement is included by reference spoke to our website and a press release.
For the first quarter of 2020 of the company had net sales.
$80.578 million, that's compared to 88.
$606000 2019.
For the first quarter of 2020, net sales were down 9.1% as compared to the same core and 19.
For the first quarter 2020 of the company had a loss from continuing operations.
A few million $612000 for 18 cents per diluted share as compared to a loss of $6.641 million or 42 cents per share.
And the first quarter of my team.
Our residential products sales were down 743% for the quarter with the industry, we estimate being down mid single digits, that's compared to the prior year.
Residential sales were the most impacted through our mass merchant sales channel.
Relatively stronger sales from our traditional flooring retailers until the crisis yet.
Despite the impact to the covert 19 pandemic respects, so hard surface sales were still up over 80% from first quarter of last year.
All brands and specialty retail were strong hard surface sales were getting a lot of momentum.
Both Tricor and Fabrica War.
Our commercial business in the first quarter was down 12.9% on a year over year basis, while the industry. We believe was down in the low single digits for the same period.
Our commercial modular tile sales were more impacted that our broadband sales for the period <unk> commercial hard surface sales were up over 40% for the period relative a year ago.
The first quarter was progressing well until we began to feel the impact of the covert 19 outbreak.
Since mid March all markets have been impacted at all customers, who had to make changes and how they do business. It has required that we focus more closely on conserving cash.
10 yearly adjusting running schedules to better better service customers, while reducing inventories at the same time, we've had to significantly reduce cost and defer or eliminate some initiatives until the timing of the recovery is more predictable.
Our organization that has done an excellent job, putting together plans to ensure the health and safety of our associates as outlined in our press release, we have taken the appropriate action.
At all facilities to provide a safe work place.
I'll now ask Alan Banzi to review, our first quarter financial results after which I will discuss in more detail the impact to covert 19 on our current business Alan.
Thank you Dan.
Dan commented on earlier, our net sales in the first quarter 2020 were $80.6 million.
So the 9% decrease on the 2009 seeing first quarter net sales of 88.6 million.
We believe we began seeing the negative sales impact related to the pivot 19 pandemics in mid to late March or commercial product sales were down 12.9% with commercial self service product sales down 16.5%, while the industry. We believe was down in the single digits.
Our residential product sales are down 7.3% without surface product sales on residential being down 11.8% what industry, we believe being down in the mid single digits.
Gross profit for the quarter was 23.6% with net sales compared to 21.4% into first quarter 2019.
In 2000 lighting or cost of sales was negatively impacted by higher variances in our manufacturing operations.
Our 2020 cost of sales reflected operational improvements as we expected as part of our restructuring plan in 2000 lighting and included in our 2020 business plan.
Selling and administrative cost in the first quarter 2020 were $1.3 million lower than the first quarter of 2019.
Due to the lower net sales and 2020, selling and administrative expense as a percent so were higher at 25.3% in the first quarter 2020 compared to 24.4% in the first quarter 2019.
Actually it's selling administrative expenses was the result of lower sales activity reductions implant temple activity and other cost reductions.
The operating loss in the first quarter 2020 was $1.3 million compared to a loss of 4.9 million in 2019.
Our total debt increased about $2.3 million on the into fiscal year 2019, the decrease but $42.1 billion when compared to the first quarter of 2019.
Well. So this decrease in debt interest expense into first quarter was down 25.3% as compared to the first quarter 2019.
This decrease in bit and interest expense year over year is primarily the result of better use of working capital and the sale of our California facility with fourth quarter of 2019.
Diluted earnings per share from continuing operation was 18 was negative 18 cents turning to our balance sheet at the end of March 2020, receivables increased $1.1 million compared to 2019 year in balance.
The increase the receivables with result of higher sales volume in the month in March as compared to December and the low seasonal balance at the end of December.
Our inventory increased $2.7 million in the first quarter 2020 from the seasonal low at the end of 2019.
Capital equipment acquisitions, including those funded by cash and financings.
His point 7 million in first quarter 2020.
Depreciation and amortization during the quarter was $3 million.
We anticipate capital expenditures with 2020 to be approximately $3.5 million <unk> depreciation and amortization of approximately $10.6 million.
The availability under our long term credit agreement is currently $10.7 billion.
On May 14, their response to the Cobot 19 pandemic, we amended our credit agreement to decrease the loan commitment in my would be mail to collateralize assets currently available as well as to increase the amount of credit available to the company.
In addition, as parties agreement the company is pursuing additional borrowing under fixed asset loan.
Our investor presentation, including our non-GAAP information is on our website at Www Dot the Dixie group Dotcom, Dan. Thank you Alan.
We had a slow start to our sales in January but sale significantly improved in February.
Before finally seeing the slide in sales due to the covert 19 crisis impact us the last three weeks of the core.
Our low corn and orders occurred around the Easter holiday.
And have improved each week since that time.
As the extent of the cover 19 pandemic became apparent we implemented our continuity plan to maintain the health and safety of our associates.
Reserve cash and minimize the impact on our cost.
We have had some cases are cobot 19 exposure in our operations for which we took appropriate cleaning and safety measures, including large scale cobot 19 testing mandatory temperature checks prior to starting work and deep cleaning and sanitation.
We limited travel for our associates implemented work from home options, where appropriate and limited physical contact with our customers.
We have reduced our running schedules for most facilities to warm shift just when they start shipping levels. So we could maintain order flow because those customers for which we still had requirements, while simultaneously reducing inventories to align them with our lower customer demand.
In order to preserve cash we have placed a large percentage of our associates either on rotating layoffs or furlough.
That's the severity of the code Red 19 pandemic became more apparent we quickly reviewed appropriate actions and implemented at approximately 14 million in cost cuts to the current year.
These costs.
Reductions, including cutting non essential expenditure, reducing capital expenditures select job eliminations and temporary salary reductions, we also deferred new product introductions and reduced our SAP line marketing expenses for 2020.
We have worked with suppliers lenders and landlords techxtend payment terms in the second quarter for existing agreements, we're taking advantage of deferral of payroll taxes under their care act as well as differing payments into our defined contribution retirement plan.
Modified our senior credit facility can provide additional flexibility with regard to alone availability during this uncertain period.
This bank amendment to our senior credit facility has increased our borrowing costs slightly while reducing the size of the well I'm hoping.
Reducing the size of the lending facility to better fit our reduced borrowing bases, we continue to reduce our inventories to improve liquidity.
The company's current availability as Alan mentioned is $10.7 billion.
So we're not certain with regard to the long term impacts of the covert 19 crisis, we do not anticipate any long term effects to our markets or operating practices. We look forward to our market returning to normal as we see many of our customers opening back up across the country.
As states are loose loosening, the restrictions on retail and constructing construction sectors of our economy.
When the virus began to spread in China, we became concerned at our suppliers there would not be able to service.
Rapidly growing LTC business, Fortunately that has not proven to be the case and we've been able to support the growth of our hard surface business.
With the beginning of the pandemic, our orders and sales declined dramatically in late March and early April.
The first few weeks of April were impacted the most than our sales and orders decreased over 50% for the month of April.
However, since the second week of April our sales and orders have continued to improve and in May we anticipate sales and orders being down in the 35% range, but continuing to improve sequentially.
Many of our customers are opening up and beginning to generate business.
We.
I would expect to continue improving and to be more at more normal levels later in the year.
We're excited to celebrate 100 years in business ethics.
Our hundred year history, the company over our hundred year history. The company has transformed itself again and again.
Just as a second World war required with that could change we're adapting to the issues confronting us in the current pandemic.
Proud of how quickly our entire team has made changes to help mitigate the impact of the covert night team.
As we have in the past I'm certain we will emerge from this crisis I better and stronger company.
Proud of our history and heritage and we're excited about starting the next 200 years as a company.
At this time, we will.
Open up to meet the conference call for questions.
Thank you.
We are happy to open the conference call the question.
The question Please press star one.
Thank you Todd.
Information telling more indicate your line is in the question Q.
You May proceed start to.
A question from the Q.
Speaker equipment, maybe necessary to pick up your hands that before pressing the star Keith one moment. Please equal for your question.
Our first question comes from the line of Barry Blank with gauge Darby and company. Please proceed with your question.
Good morning, Dan.
<unk> <unk>.
Couple of questions. The first one is questions pandemic and lot of companies have been severely hurt and financial trouble.
This may be an opportunity for Dixie group to possibly pick up other companies in the industry and possibly in the heart flooring industry.
Have you been looking at this one is there any prospects out there for you at this time.
Barry I think right now.
Our concentration has been more internal and external.
However, I <unk> and it will depend on how long the pandemic last or how much it impacts business, but obviously, if there are opportunities that.
I would make sense for us, we would like and tech.
Oh look at them.
[noise] keep my second question is how much government assistance I know you mentioned something about the payroll thing, but I'm not sure exactly.
How much you're able to get and what programs. The open for you at this time.
Yes.
Barry This is Jon Faulkner, Yes, Tom Hey.
Good point in time, we're taking advantage of the deferral of.
Hey, we're all taxes, which we can differ through the end of year and then we pay over the next two year period, we have looked at but we do not qualify under the payroll protection plan and the main street lending program.
It really not been opened up yet by the bank we have.
Look at it on the service and we are still investigating opportunities there but.
The banks are still going back to the fed on various questions on that program. So.
We will still consider opportunities for that program if they fit our financing need at this point in time, we have not yet made application.
Okay. Thank you very much.
Thank you Barry.
Thank you once again nice ask a question. Please press star one on your telephone keypad for participants using speaker appointment maybe necessary to pick up your hands that before passing the Starkey. Our next question comes from the line of Barry partner with Citi stable. Please proceed with your question.
Hey, good morning, guys.
Congrats on a quarterly.
I don't quote me.
Like a quite surprising and as usual you well managed to keep things moving my question I think John I've got two at a couple of minutes back is on the governmental assisting side.
We've seen some sort of.
Guidance around the staffing companies that had engage in buybacks you last 12 months will not have access to some of the center. What was your programs had you encountered anything similar or is that something that you take into consideration when when looking towards that scored assignment.
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Everything we've investigated so far.
It does not matter in terms of whether we purchased stock in the passing does all of them up there to put restrictions on any future purchases.
During the period in which you would have alone as well as for up to a year thereafter.
And again that will be one of those items, we would consider.
But at this point in time since we had not yet or take advantage of the main street lending program because of this lack of clarity from the fed on certain items of it.
Until we get those questions answered, how we would not not made decision one way.
Obviously as a consideration.
During the review of those results.
Oh. Thank you and then one more quick question you mentioned didnt, even as we speak here earlier today I'm doing the company had hired.
Sure.
For the hardcovers side of things.
But at the same time, obviously use Lee you know partially weighed offered for load a bunch of employees is that so.
Speaking about as it relates to sort of bifurcated.
Which employs he makes sense to grow out. This this staff, while keeping some on furlough as you're not running at full capacity.
Barry.
This is Dan we did hire a earlier in the year a number of associates that would.
At our salespeople for hard surface products, only they're done very well.
We have obviously not cut back.
On on salespeople during this environment.
And particularly in hard surface salespeople. So weaken said continue to see that business improving over last year. Despite the fact of the covert 19 impact. So we're very pleased where that and we'll continue to investors.
As you should be Kingston numbers on the hardcover.
Surprisingly, even better than where we had modeled so I understand that thank you. So much have agreed to.
Thank you.
Thank you with no questions in the queue I will now turn the call back over to Dan Cyrusone for any closing or additional remarks.
Michelle Thank you very much and for all of the all of you on the call. Thank you for.
Being with us.
We're all going through a most unusual period.
Our company is 100 years old. This is the first and then make we've gone through a we certainly hope come out the other and a stronger company. Thank you again.
Dr. You next quarter.
Thank you ladies and gentlemen, this concludes todays conference. Thank you for your participation you may disconnect your lines and have a nice bag.