Dixie Group 1Q Earnings Off

Chattanooga, TN, April 30, 2007--The Dixie Group in the first quarter, including discontinued operations, reported net income of $171,000, or $0.01 per diluted share, in the first quarter of 2007, compared with net income of $835,000, or $0.06 per diluted share, in the first quarter of 2006.

Analysts were anticipating earnings of $0.06.

Sales for the first quarter of 2007 were $74,490,000, down 6% from sales of $79,173,000 in the year-earlier quarter.

The company reported income from continuing operations of $237,000, or $0.02 per diluted share, for the first quarter ended March 31, 2007, compared with income from continuing operations of $926,000, or $0.07 per diluted share, for the first quarter of 2006.

Results related to discontinued operations reflected a loss of $66,000, or $0.01 per diluted share, in the first quarter of 2007, compared with a loss of $91,000, or $0.01 per diluted share, in the first quarter of 2006.

Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, "First quarter results reflected a 6% decline in our sales of carpet products. Nevertheless, our sales continued to outperform the carpet industry as a whole, where sales were off almost 10% compared with the year-earlier period. Almost 60% of our carpet sales decline was due to lower sales to one customer - The Home Depot - where carpet business was extremely weak. Residential carpet sales to our other customers were down only about 4%, and our commercial carpet sales were off less than one-half of 1%.

"Despite lower revenue and the effect on fixed costs of the drop in unit volume, our gross margin as a percentage of net sales improved compared with the first quarter a year ago. Higher average selling prices, better product mix, improved production quality and manufacturing efficiencies all had a positive impact on our gross margin percentage. The average selling prices of our carpet business rose to over $21.00 per square yard in the first quarter of this year, compared with average selling prices of less than $20.00 per square yard in the first quarter of last year.

"Sales of our new modular/carpet tile products, introduced last year, continued to grow and have been well received in our markets. Sales of modular/carpet tile were over $800,000 in the first quarter of this year while the negative impact of this start-up operation on our first quarter results was less than $300,000. We continue to be very optimistic that this new business will grow and make a positive contribution to our operating results during the last half of this year.

"Despite the industry's softness, our emphasis on development and introduction of new and differentiated products has continued. Our new Dixie Home and Office collection of Stainmaster(R) commercial products that will be sold through retail stores and Masland's and Fabrica's wool products collections are on schedule to reach the marketplace later this year. These new products should fuel sales growth. Although our sales and order-entry rates for residential products remained weak in April, sales and order-entry rates in our commercial business improved sharply. We are optimistic that conditions in the residential portion of our industry will improve in the last half of this year. The improvement we are seeing in our commercial business and the anticipated effect of our new residential products make us optimistic that our sales will continue to outpace those of the carpet industry," Frierson concluded.

Related Topics:The Dixie Group, Masland Carpets & Rugs