Q1 2025 The Dixie Group Inc Earnings Call
Operator: Good day and welcome to the Dixie Group Incorporated 2025 First Quarter Earnings Conference Call. Today's call is being recorded.
Good day and welcome to the Dixie Group incorporated 2025 first quarter earnings Conference call.
Today's call is being recorded at.
Daniel Frierson: At this time for opening 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, Rob. And welcome everyone to our first quarter 2025 conference call.
Speaker Change: At this time for opening remarks, and introductions I would like to turn the call over to the chairman and Chief Executive Officer, Dan Frierson. Please go ahead.
Speaker Change: Thank you, Rob and welcome everyone to our first quarter 2025 conference call I have with me Alan Dancy, our CFO.
Daniel Frierson: I have with me Allen Danzey, our CFO. Our Safe Harbor Statement is included by reference both to our website and press release. The first quarter of 2025, the company had net sales of $62,990,000 as compared to $65,254,000 in the same quarter of 2024. The company had an operating income of $11,000 in the first quarter of 2025 compared to an operating loss of $857,000. thousand dollars in the first quarter of 2024. The net loss from continuing operations in the first quarter of 2025 was $1,582,000, or $0.11 per diluted share. In 2024, the net loss from continuing operations for the first quarter was $2,410,000, or $0.16 per diluted share.
Speaker Change: Safe Harbor statement is included by reference both to our website and press release.
Speaker Change: So the first quarter of 2025, the company had net sales of 62.990 million as compared to $65 million 254000 in the same quarter of 2024.
Speaker Change: The company had an operating income of $11000 in the first quarter of 2025 compared to an operating loss of 857.
Speaker Change: In dollars in the first quarter of 2024.
Speaker Change: Loss from continuing operations in the first quarter of 2025 was a million $592000 or 11 SaaS per deluded share in 'twenty to 'twenty four the net loss from continuing operations for the first quarter was $2.410 million or 16 cents per diluted share.
Daniel Frierson: The industry continues to experience weak market conditions driven by low existing home sales and lower consumer cost. Our first quarter net sales were down three and a half percent from the same period a year ago. sales of our soft floor covering products, again outperformed our hard surface products. and we continue to gain market share in the soft surface category. Just as in the previous quarter, premium products perform better than the market in all categories. Despite the lower sales volume, our gross margins in the first quarter were favorable to prior year at $16,902,000 or 26.8% of net sales compared to $15,008,000 or 24.2% of net sales in the prior year.
Speaker Change: The industry continues to experience weak market conditions, driven by low existing home sales and lower consumer confidence.
Speaker Change: First quarter net sales were down three 5% from the same period a year ago.
Speaker Change: Sales of our soft floor covering products again outperformed our hard surface products and we continue to gain market share in the soft surface category.
Speaker Change: Just as in the previous quarter premium products performed better than the market in all categories.
Speaker Change: Despite the lower sales volume our gross margins in the first quarter were favorable to prior year at 16.
Speaker Change: $902000 or 26, 8% of net sales compared to 15 million eight or 24, 2% of net sales in the prior year.
Daniel Frierson: The improvements are primarily the result of our continued focus on cost reductions and operating efficiencies throughout the company.
Speaker Change: The improvements are primarily the result of our continued focus on cost reductions and operating efficiencies throughout the company.
Allen Danzey: At this time, Allen will review our financial results, after which I'll have additional comments regarding our results. Thank you, Dan. As Dan commented, we're very pleased to see the strong improvements in the year-over-year gross margins, and that's despite the lower sales volume. This is a result of our ongoing initiatives to reduce costs of materials and throughout our production process. Selling and administrative expenses in 2025 were $500,000 or about 3.1% higher than prior year. And that increase was partially driven by higher professional fees in our administrative areas during the quarter. Our first quarter operating income was $11,000 and that compared to an operating loss in 2024 of $857,000.
Speaker Change: At this time, Alan will review, our financial results after which I'll have additional comments.
Speaker Change: Regarding our results thank.
Alan Dancy: Thank you Dan staying commented, we're very pleased to see the strong improvements in our year over year gross margins. Despite the lower sales volume.
Alan Dancy: As a result of our ongoing initiatives to reduce cost of materials and throughout our production processes.
Alan Dancy: Selling and administrative expenses in 2025, or 500000 or about three 1% higher than prior year.
Alan Dancy: And that increase was partially driven by higher professional fees in our administrative areas during the quarter.
Alan Dancy: Our first quarter operating income was $11000 and that compared to an operating loss in 2024 of 857000.
Allen Danzey: The 2025 operating income included income from our leasing of available warehouse space to other tenants, and the year over year reductions and facility consolidation. Our interest expense on the year was $1.5 million, compared closely to the interest expense in the same period of the prior year. The net loss on the year 2024 was $1.7 million, compared to a net loss of $2.5 million in the prior year first quarter. On our balance sheet, our year-end receivables of $27.9 million was up from our seasonally low year-end balance of $23.3 million. Our net inventory balance at the end of the first quarter was $66.7 million, and that compared to the net inventory balance of $75 million in the first quarter of the previous year.
Alan Dancy: 2025 operating income included income from our leasing of available warehouse space to other tenants and a year over year reduction of some facility consolidation expenses.
Alan Dancy: Our interest expense on the year was $1 5 million compared closely to the interest expense in the same period of the prior year.
Alan Dancy: The net loss in the year 2024 was one 7 million compared to a net loss of $2 5 million in the prior year first quarter.
Alan Dancy: On our balance sheet, our year end receivables were $27 9 million was up from our seasonally low year end balance of $23 3 million.
Alan Dancy: Our net inventory balance at the end of the first quarter was $66 7 billion.
Alan Dancy: Parents, a net inventory balance of 75 million in the first quarter of the previous year, we had a planned reduction of inventory in the fourth quarter of last year, and we continue to manage inventory at lower levels, while maintaining timely service to our customers.
Allen Danzey: We had a planned reduction of inventory in the fourth quarter of last year, and we continue to manage inventory at lower levels while maintaining timely service to our customers. Cal's payable and accrued expenses were $41 million compared to $39 million in the same period of the previous year. Net property, plant, and equipment decreased by $1.2 million from prior year end. And that decrease was driven by $1.3 million in depreciation during the quarter, offset by $74,000 in capital expenditures.
Alan Dancy: He'll stay cool and accrued expenses were $41 million compared to 39 million in the same periods of the previous year.
Alan Dancy: Property plant and equipment decreased by $1 2 million from prior year and that decrease was driven by $1 3 million of depreciation during the quarter offset by 74000 and capital expenditures.
Allen Danzey: The planned capital expenditures for 2025 totals $2.5 million and depreciation is expected to be $5.4 million.
Alan Dancy: The planned capital expenditures for 2025, total $3 5 million and depreciation is expected to beef up four 4 billion.
Allen Danzey: Within the quarter, we were pleased to announce the closure on our new $75 million senior credit facility with MidCap Financial. Proceeds from this facility were used to pay off and close our former senior credit facility with Fifth Third Bank. This new agreement is for a three-year term. The debt on our balance sheet increased by $2.3 million from year end. As part of our new loan agreement, we now have restricted cash of $4.3 million to secure our letters of credit. Under our former loan agreement, this amount for the letters of credit was a reduction of our loan availability.
Alan Dancy: Within the quarter, we were pleased to announce the closure on our new $75 million senior credit facility with Midcap financial.
Alan Dancy: Sales from this facility were used to pay off and close our former senior credit facility with fifth third bank.
Alan Dancy: The new agreement is for a three year term.
The debt on our balance sheet increased by $2 $3 million from year end as part of our new loan agreement. We now have restricted cash of $4 $3 million to secure our letters of credit under our.
Alan Dancy: A lot of agreement this amount for letters of credit was a reduction of our loan availability there.
Allen Danzey: The increase in debt includes the additional borrowing to cover this restricted cash that was held for letters of credit. Our availability yesterday under our new senior credit facility was $12.3 million, which is subject to a $6 million excess availability requirement.
Alan Dancy: The increase in debt includes the additional borrowing to cover this restricted cash that was held for letters of credit.
Alan Dancy: Our availability yesterday under our new senior credit facility was $12 3 million, which in which is subject to a $6 million of excess availability requirement.
Daniel Frierson: Our investor presentation will be available on our website at www.dixiegroup.com. Thank you, Allen. Low consumer confidence was further impacted during the quarter by the uncertainty around the announcement of tariff increases. We had previously minimized the amount of our products being imported from China, and we have worked with all of our suppliers of imported products to reduce the impact of tariffs on the costs of our products. The situation is very volatile at this time and it is difficult, if not impossible, to predict what the impact of increased tariffs will be on imported products. At this time, several industry players have already announced price increases.
Alan Dancy: Over our investor presentation will be available on our website at www Dot Big secret Dot com.
Speaker Change: Thank you Alan low consumer confidence was further impacted during the quarter by the uncertainty around the announcement of tariff increases.
Alan Dancy: Previously minimize the amount of our products being imported from China, and we have worked with all of our suppliers.
Alan Dancy: With imported products to reduce the impact of tariffs on the cost of our.
Alan Dancy: Products. The situation is very volatile volatile at this time and it is difficult if not impossible to predict what the impact of increased tariffs will be on imported products.
Alan Dancy: At this time several industry players have already announced price increases.
Daniel Frierson: to impact, excuse me, to mitigate the impact of increased tariffs and or potential tariffs.
Alan Dancy: Impact excuse me to mitigate the impact of increased tariffs or potential tariffs.
Daniel Frierson: We were pleased by the success of the first quarter trade show. Including Surfaces, where we showcase 25 new styles of carpet across our nylon, polyester, and decorative collections. Our focus continues to be on creating differentiated styles for the residential market. an emphasis on color, pattern, and textural vision. This includes our Step Into Color campaign, where we offer the best and broadest color lines in the industry. including custom color, color options. and our white dyeable nylon collections produced through our nylon extrusion operation that began production last year. We also showcased eight hard surface collections with new visuals and innovations.
Alan Dancy: We were pleased by the success of the first quarter trade shows, including surfaces, where we showcased 25, new styles of carpet across our nylon and polyester and decorative collection.
Alan Dancy: Our focus continues to be on creating differentiated styles for the residential market with an emphasis on color pattern and textual textural visuals.
Alan Dancy: This includes our step into color campaign, where we offer the best and Bronx color lines in the industry, including custom color color offerings.
Alan Dancy: And our white dabble nylon collections produced through our nylon extrusion operation that began production last year.
Alan Dancy: We also showcased eight hard surface collections with new visuals and innovations and 10, new colors and our fabric. The wood program, which we're all very well received and will continue to fuel growth in this program and our true core brand.
Daniel Frierson: 10 new colors in our FabricaWood program, which were all very well received and will continue to fuel growth in this program. In our TrueCore brand, we are focused on simplification of our product line and consumer-friendly messaging. featured new visuals and constructions in several of our SBC, WPC, and Laminate programs. The residential remodeling market continues its multi-year slump. And no one knows for sure when the market dynamics will change. Until that happens, we will continue to manage our business to reflect the current conditions. We have seen continued improvements in our operations, with major strides being made in productivity, quality, and raw material utilization.
We are focused on simplification of our product line and consumer friendly messaging, we featured new visuals and constructions in several of our SBC WPC and laminate.
Alan Dancy: Programs.
Alan Dancy: Residential remodeling market continues its multi year swap.
Alan Dancy: And no one knows for sure when the market dynamics will change.
Alan Dancy: Until that happens we will continue to manage our business to reflect the current conditions.
Alan Dancy: Seeing continued improvements in our operations with major strides being made in productivity quality and raw material utilization.
Daniel Frierson: We've also had reductions in inventory, and with better service to our customers. We are continuing to minimize expenses and capital expenditures. reduce overhead costs and lower operating costs, thereby improving gross margins. As Allen noted, during the first quarter, we closed on a new three-year, $75 million credit. First quarter, we completed the first year of our extrusion operation, which has contributed to our margin improvement and supports our commitment to piece-diable nylon fiber, which enables us to operate broad... Palette of Color to our discriminating customers, which we are promoting with our Step Into Color marketing campaign. Sales for the first five weeks of the second quarter are running slightly behind the year-ago period.
Alan Dancy: Also had reductions in inventory and with better service to our customer.
Alan Dancy: The minimum minimize expenses and capital expenditure.
Alan Dancy: Reduce overhead costs and lower operating costs, thereby improving gross margin.
Alan Dancy: As Alan noted during the first quarter, we closed on a new three year $75 million credit facility.
Alan Dancy: First quarter, we completed the first year of our extrusion operation, which has contributed to our margin improvement.
Alan Dancy: And supports our commitment to peace dabbled nylon fibers, which enables us to offer a broad.
Alan Dancy: Pat a lot of color to our discriminating customers, which we are promoting with our step into color marketing campaign.
Alan Dancy: Sales for the first five weeks of the second quarter are running slightly behind the year ago period.
Daniel Frierson: sequentially about 10% above the first quarter level. We believe that the actions we have taken to improve our results during the current difficult environment also position us for the eventual upturn which we will inevitably experience. The actions we have taken have been done with an eye on the future.
Alan Dancy: But sequentially about 10% above first quarter levels.
Alan Dancy: We believe that the actions we have taken to improve our results during the current difficult environment.
Alan Dancy: Also position us for the eventual upturn, which we will and are inevitably experience.
Alan Dancy: The actions, we have taken that had been done with an eye on the future.
Daniel Frierson: When Interest Rates Recede and Housing Rebates We will be in a great position to take advantage of a prolonged upturn in existing home sales and a strong residential remodeling market.
Alan Dancy: When interest rates receipt and housing rebounds, we will be in a great position to take advantage of a prolonged upturn in existing home sales and a strong residential remodeling market.
Operator: At this time, we would like to open the call to questions. Thank you. We will now be conducting a question and answer session.
Alan Dancy: At this time, we would like to open the call to questions.
Alan Dancy: Thank you well now be conducting a question and answer session.
Operator: If you'd like to ask a question at this time, you may press star 1 from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Alan Dancy: If you'd like to ask a question at this time you May press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Alan Dancy: You May press star two if you'd like to withdraw your question from the queue.
Alan Dancy: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: One moment please while we poll for questions. Thank you.
Alan Dancy: One moment. Please we poll for questions. Thank you.
Operator: Thank you, and we have a question from the line of Barry Blank with J.H. Darby. Please receive your question.
Alan Dancy: Thank you and we have a question from the line of Barry Blank with change Tobey. Please proceed with your questions.
Barry Blank: Good morning, Dan. Good quarter. A couple of questions. Previously, you mentioned there was a stock buyback program. Is that program still in effect? And if so, how much have you used of the allocation? Barry, that program is not in effect anymore. We ceased that during the latter part of last year.
Speaker Change: Good morning, Dan.
Speaker Change: Good quarter.
Speaker Change: Couple of questions. Previously you mentioned there was a stock buyback program.
Speaker Change: Is that program still in effect and if so how much have you used of that.
Speaker Change: The allocation.
Barry Blank: Barry that program is not in effect anymore, we see that during the latter part of last year.
Barry Blank: Okay, my second question is...
Speaker Change: Okay. My second question is.
Barry Blank: Due to this downturn, are you seeing much consolidation in the industry? Companies either merging or going out of business? In terms of manufacturers, no. We have not seen much consolidation at all, much consolidation activity.
Speaker Change: Due to this downturn are you seeing much consolidation in the industry are.
Speaker Change: Companies, either merging or going out of business.
Speaker Change: In terms of manufacturers.
Speaker Change: No.
Speaker Change: We have not seen much consolidation at all much much consolidation activity.
Daniel Frierson: At the retail level, there have been some smaller retailers who have gone out of business. And I think there's always churn there because there are so many retailers of floor covering products. But no, we have not seen at the manufacturing or of distribution level much consolidated.
Speaker Change: At the retail level, there have been some smaller retailers, who have gone out of business.
Speaker Change: But and I think that will.
Speaker Change: I always churn there because there are so many.
Retailers are floor covering products, but no we have not seen at the manufacturing or.
Speaker Change: Distribution level much consolidation.
Daniel Frierson: And my last question is, have you seen much of the change in the buying habits between people going to the big box stores versus the more, I guess, boutique kind of places that you would buy the flooring from are pretty much the same. Well, as I tried to point out in my comments, I think in every flooring category that the premium products are performing better than the market for those products overall. We certainly have seen that in the soft floor cluttering market, in spades, our Fabrica brand has done exceptionally well. and is obviously premium products.
Speaker Change: And my last question is have you seen much.
Speaker Change: Much of the change in the buying habits between people who are linked to this to the big box stores versus.
Speaker Change: Versus the.
Speaker Change: Well I guess boutique kind of places that you would buy flooring pharma or is it pretty much the same.
Speaker Change: Well as I tried to point out in my comments I think in every flooring category. The premium products are performing better than the <unk>.
Market for those products overall, we certainly have seen that in the south for clothing market in spades, our fab breaker brand has done extremely exceptionally well.
Speaker Change: And it's obviously for our premium products I think you're seeing that overall.
Daniel Frierson: I think you're seeing that overall, but that's not uncommon in a down.
Speaker Change: But.
Speaker Change: That's not uncommon in a downturn a matter of fact, they only downturn I can remember when that didn't happen was in 2008 and a.
Daniel Frierson: As a matter of fact, the only downturn I can remember when that didn't happen was in 2008 and 2009 during the Great Recession.
Speaker Change: Great recession.
Speaker Change: Yeah.
Barry Blank: Thank you very much.
Speaker Change: Well, thank you very much.
Operator: Thank you, Barry.
Speaker Change: Thank you Barry.
Operator: Thank you.
Speaker Change: Thank you.
Daniel Frierson: With no further questions in the queue, I'll turn the call back to Dan Frierson for any additional closing remarks. Bob, thank you very much, and we appreciate everybody being with us for the first quarter conference call. We're looking forward to your being with us again in about three months for our second quarter conference call. Thank you.
Speaker Change: No further questions in the queue I'll turn the call back to Dan Frierson for any additional or closing remarks.
Dan Frierson: Thank you very much and we appreciate everybody being with US for the first quarter conference call. We're looking forward to your being with US again in about three months for our second quarter conference call. Thank you.
Operator: This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This will conclude today's conference you may disconnect your lines at this time and thank you for your participation.