Q4 2024 The Dixie Group Inc Earnings Call
Speaker Change: Good day, and welcome to the Dixie Group Inc. 2024 variance conference call.
Speaker Change: Today's call is being recorded. At this time for open remarks and introductions, I would like to turn the call over to the Chairman and Chief Executive Officer, Dan Frierson. Please go ahead.
Thank you, Shimali.
Speaker Change: and welcome everyone to our fourth quarter, 2024 conference call, have with me Allen Danzey, our chief provincial officer.
Speaker Change: Our safe harbor statement is included by reference both to our website and press release.
Speaker Change: In the fourth quarter of 2024 net sales were approximately 64.4 million compared to 66.7 million in the fourth quarter of the prior year.
Speaker Change: and that loss for the fourth quarter of 24 was $7,198,000 compared to $3,160,000 in the fourth quarter of 2023, which included an $8,198,000 gain on the sale of asset.
Speaker Change: The fiscal year of 2024 net sales for the company were 265 million and compared to 276 million.
for the fiscal year 2023.
Speaker Change: The net loss from continuing operations on the year was $12,210,024 or $0.83.
Speaker Change: for Deluted Chair. Compared to a net loss of $1,952,000 for $13,000 for Deluted Chair.
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Allen Danzey, Dixie Group
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Allen Danzey,
Speaker Change: This time, Allen Danzey will review our financial results after which I will have additional comments.
Speaker Change: Thank you, Dan. As they had mentioned this, those were the fiscal year of 2024, 4.1% down for the prior year.
Speaker Change: High interest rates, close summer competence, have delayed summer decisions around large secondary spending, and include help purchasing remodeling to our big drivers for our business.
Speaker Change: In addition, significant and unusually high charges related to utility expenses in our California operations, both expenses under our SILF Church Medical Plan, and right down to the inventory, all had an unfavorable impact on our gross part.
Speaker Change: The gross profit margin of 2024 was 24.7% of net sales compared to 26.7%
Michael Hughes, Christian Riemenschneider,
Michael Hughes, Daniel Frierson, Christian Riemenschneider,
Speaker Change: Sailing in administrative expenses in 2024 were reduced from 2023 by $4.3 million from $5.87 net sales. This was the result of the year-of-year plan cost-cutting initiatives, particularly in our sample areas, where we were able to reduce the cost of still continuing to service
Speaker Change: Ferred in purpose is in our other operating income and expense, 2023, 4th quarter result, 75 from an $8.2 million gain sales asset, showed another operating income.
Speaker Change: Disability Consolidation Expenses, which includes the rest of the digital costs of our e-cose manufacturing consolidation plan. We're $2.5 million lower in the prior year and that included $238,000 in additional write down of idle assets for support of $24.4.
Speaker Change: Our interest expense on the year was $6.4 million, compared to $7.2 million in 2023.
primarily driven by lower income right here.
Speaker Change: That loss on the year 2024 was $13 million compared to the net loss of $2.7 million.
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Allen Danzey,
Speaker Change: for a balance sheet for year-end receivables of $3.3 million, slightly below for 1.5% down for the prior year in balance, $3.7 million.
That reduction, again, was primarily achieved in the fourth quarter.
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Allen Danzey, Barry Gertner, Dixie Group
[inaudible]
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Dixie Group
Speaker Change: at Property Plant Equipment Increase, plus 2.4 million for the prior year end. This increase included cash purchases of 2.1 million dollars per year, prior year deposits of food and
Now, let's see.
Daniel Danzey, Daniel Frierson
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Dixie Group
Speaker Change: In addition to keeping in-a, we're all set by approximately $6.5 million in depreciation.
Speaker Change: We want to point out, we're pleased to have closed judgment to year end on our new $75 million senior credit facility.
Daniel Danzey, Daniel Frierson
Michael Frierson, Christian Riemenschneider, Allen Danzey, Barry Gertner, Allen Danzey,
Speaker Change: Coring availability under the two credit facilities, approximately 12.2 million hours.
Michael Frierson, Christian Riemenschneider, Allen Danzey, Barry Gertner, Allen Danzey,
Speaker Change: Thank you, Allen. Existing home sales, which tend to be the catalyst for our industry improvement, continued to be subdued during last year. Existing home sales over the last three years have declined dramatically from over 6 million homes per year to under 4 million.
Speaker Change: The interest rate reductions which we were expected for earlier in the year did not come about until late 2024.
Speaker Change: Even though the economy has avoided recession, our industry has been in the recession for several years and existing home sales for at the lowest point since 1995 and at that time our population was 25% lower.
Speaker Change: which means the weak existing home sales numbers are even more impactful today.
Speaker Change: Actual square yards of carpet chips in the last three years are down 25%
Speaker Change: Despite having gained market share during this period, we have had to take significant actions to lower cost, restructure facilities, and streamline operation.
Speaker Change: Since the end of the year, we have successfully renegotiated our existing asset back loan for a new three-year period. This transaction puts us in a stronger position to weather storms in the future and enhance our ability to grow our business.
Speaker Change: During 2023, we reduced cost by over $35 million as a result of our restructuring plan to better land capacity and cost the current bond.
Speaker Change: and 24. We further reduce cost by over ten million dollars and are taking action with a full again reduced cost by over ten million dollars in 2020.
Speaker Change: has also been stewards of our working capital and reduced inventory by $16 million over the last two years.
Speaker Change: Production and business is also an associated reducing our number of associates by approximately 28% over the last three year period.
Speaker Change: Our capital expenditures have been maintained at a very little level, other than the investment and extrusion equipment which was made.
Speaker Change: and not only provide us with lower cultural material, but ensure a consistent supply if additional suppliers were to exit the distance, which took place in late 2024 with the exit of the
Speaker Change: Our extrusion equipment started up in late first quarter of last year and is now running it to
Speaker Change: Our commitment to be stable now on fiber enables us to offer a larger pallet of color for our discriminating custom, which we are promoting with our step into color campaign.
Speaker Change: as well as our designers to create unlimited color offers for every market, as well as offering custom color to our most concerning customers upon demand.
Speaker Change: and our customer relationship helping us gain market share in a difficult period.
Speaker Change: Our initial, our initiative to grow our hard surfaces centered around our crew core brand to which we continue to add new offerings.
Speaker Change: These products would, known and tall visuals, provide waterproof, easy-to-plane solutions for today's presidential test.
Speaker Change: of Stabrika High and Woodbrook has formed well, and its existence with Stabrika's best
Speaker Change: I expanded in our significant war offering with the introduction of a wider variety of electric product through 1866 by math one and four by Fabrica. We have enhanced our position in the high end of the full covering market, game market share.
Speaker Change: This expansion reinforces our dedication to the first five, our Dixie home floor's product portfolio, and has made a positive contribution to our market share game.
Speaker Change: by incorporating our well-known style and design capabilities. At price point, we cannot reach the nylon product. We have broadened our differentiated offerings to our customers and
Speaker Change: Our marketing initiative has included both the continued focus on expanding our digital marketing effort, which has resulted in increased lead-generated
Speaker Change: sample order activity from our website and improve capabilities for online product visualization.
Speaker Change: We also saw strong growth from retail stores where we have placed our free mere flooring center probe.
Speaker Change: Investment examples, merchandising and training in these stores have provided returns of increased business and greater market share.
Speaker Change: The recent actions taken by the U.S. to implement tariffs on the rest of the world has created a sense of uncertainty regarding the cost of the imported product.
Speaker Change: At this point, we are endeavoring to ascertain what the impact will be from each of our sources.
Speaker Change: The impact, the potential impact on us would be primarily felt by our hard surface
Speaker Change: and the decorative products we employ. Our Broadland Cart Business is a place with service from our U.S. operations, but not least significantly in fact.
Speaker Change: Here's industry participants who need to raise prices to mitigate the impact of tariffs, if these tariffs are not negotiated away.
Speaker Change: is the volatile time and we will take appropriate action once the fog is cleared.
Speaker Change: Our sales so far this year have been 2025 have followed the same pattern as last
Speaker Change: The highest end self-surface sales are up and overall self-surface are near-year-old level of a heart-surface product categories are down from the previous year.
Until the man improves, we will continue reducing costs.
Speaker Change: I've already implemented a cost reduction plan for this year which exceeds $10 million. And we're also continuing to introduce inventory.
What's the level of Japan?
Speaker Change: at this time we will open the meeting to your questions.
Speaker Change: Thank you. We will now be conducting a question in the next session.
Speaker Change: If you would like to ask the question, please first start one on your telephone keypad. A confirmation tone will indicate your line isn't the question cue. You may first start to remove yourself from the cue. The participants use the speaker equipment and may be necessary to pick up their handset before pressing the start cue.
One moment. Please, while we pose for questions.
Daniel Danzey, Daniel Frierson
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Allen Danzey,
Mike Hughes: Our first question comes from the line of Michael Hughes, a private investor. Please for seeing with your question.
Mike Hughes: Good morning. Thanks for taking my questions. First, on the hard surfaces side of the business, what percent of that product is imported from China? What other countries do you import, and how quickly could you potentially pivot to other countries outside of China?
Speaker Change: At this point, very little is imported from China and that would be practically none very soon. We do import from Thailand, Cambodia, Vietnam and some from New York.
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Allen Danzey,
Michael Hughes, Christian Riemenschneider, Allen Danzey,
Speaker Change: Okay, so as of today, the hard surfaces side of the business would face the 10% tariff. I know it's a dynamic situation and it could change. Is that correct?
that is correct, other than China, yes.
Speaker Change: and then how quickly can you pass a long price on that side of the business? Is there a little bit of a period where you have to absorb the higher costs?
Mike Hughes: That's still up in the air, Mike, and several companies have announced Frierson increases, but that was based on the...
Mike Hughes: First initial increases in tariffs. So it's a little unclear at this time, but basically I think the industry will 81% of the LVT sold in this country is import.
So I think it's very likely that
Mike Hughes: Very quickly, as these tariffs become impactful, they will be passed on.
Mike Hughes: I would say everybody for television please take John , I think they are fraction of what it was a couple of years ago.
Speaker Change: Okay, and then I may have missed this in the prepared comments, but did you say what the amount of the 4Q inventory write down was, and then maybe you could just provide a little bit of collar on it.
Yeah.
Yeah, in the fourth quarter, as we mentioned, the...
Speaker Change: We had put in that head increase in our life or reserve of $46,000 on the year.
Speaker Change: but there was a peer liquidation in the fourth quarter that did result in the $380,000 $1,000 game. As far as the right now in the assets are as far as the reserve increased by $1.3 million [inaudible]
Thank you.
Speaker Change: Okay, and that was just a result of doing the physical inventory and kind of aging the inventory, is that right?
Michael Frierson, Christian Riemenschneider, Allen Danzey, Barry Gertner, Allen Danzey,
Mike Hughes: Okay, and then you talk about incremental $10 million in cost takeouts, how soon will you be at that run rate of taking $10 million out of the cost structure?
Mike Hughes: I would say we're very close to that level today, most of that was planned so a month ago.
Okay, and then...
Mike Hughes: on the new credit facility. It looks like it has minimum ebit bath thresholds, and I think the number for the 12-month-ended December .
Mike Hughes: 27th, 2025, is $9 million, so that seems like a really high hurdle given I think the adjusted number in the fourth quarter, my adjustment, which maybe incorrect is a loss of about a million and a half to two million of EBITDAQs, including the inventory right now.
Mike Hughes: Help me get to that $9 million number, what needs to happen to revenue? Does the revenue to the top line need to start to grow again for that to happen?
Mike Hughes: for the Covenant, particularly as a related to the DAW.
Mike Hughes: We feel comfortable with the amount that was calculated even in an expectation of a generally flat year
Mike Hughes: have as we talked about a number of items this year that are not exactly referring to them.
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Allen Danzey, Dixie Group
Mike Hughes: called Savings the Danzey Group out in 2025 and for a greater party is in place at this time.
Mike Hughes: I felt like, and I believe our partner built as well, that the meltwoods provided was
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Allen Danzey, Barry Gertner,
Michael Hughes, Daniel Frierson, Christian Riemenschneider
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Dixie Group
Michael Hughes, Daniel Frierson, Christian Riemenschneider,
Speaker Change: Okay, and then you talk about reducing the inventory further. You're at 66.9. How much more can you take out of the inventory?
Speaker Change: We don't make projections, but we feel like we have already reduced the inventory some of this issue.
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Allen Danzey,
Speaker Change: Okay, then two final questions for you. On the soft side of the business, is there any potential benefit from the tariffs or because you compete at the high end, there are fewer imports that are just talked through that dynamic?
I think it depends on where the tariff's end up.
whether it's the punitive one is over the 10% or something.
Speaker Change: Something else is negotiated. We're not looking at that as a potential windfall but for the domestic [inaudible]
Mboards are not a major factor.
Okay, then last question.
Speaker Change: The liquidity, I just want to make sure I'm clear because I'd read the credit agreement and I thought it was an incremental sort of a car about a 6 million that had to be left available so are you saying that 12.2 million is available to borrow that full amount is available?
That includes the $6 billion and the $12 billion.
is the full availability. Thank you so much.
[inaudible]
Daniel Danzey, Daniel Frierson
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Allen Danzey, Dixie Group
Okay, super, thank you very much.
Michael Hughes, Christian Riemenschneider, Allen Danzey, Barry Gertner, Allen Danzey, Barry Gertner,
Michael Hughes, Daniel Frierson, Christian Riemenschneider, Allen Danzey,
Speaker Change: Thank you. With no further questions in the queue, I will turn the call back to Dan Frierson for any additional closing remarks.
Speaker Change: Thank you, Shimali, and thank everyone for joining us today. Sorry, we're a little late this quarter. We are just being family with our first quarter result.
Michael Hughes, Christian Riemenschneider, Allen Danzey,
What's forward to talking with you then? Thank you.
Speaker Change: Ladies and gentlemen, that will conclude today's conference. Thank you again for your participation.
Michael Frierson, Christian Riemenschneider, Allen Danzey, Barry Gertner, Allen Danzey,
Daniel Danzey, Daniel Frierson
Daniel Danzey, Daniel Frierson