Dixie Group’s 2Q Sales & Earnings Up

Chattanooga, TN, August 1--The Dixie Group in the second quarter reported income from continuing operations was $3.6 million, or $0.28 per diluted share, compared with income from continuing operations of $3.5 million, or $0.27 per diluted share, for the second quarter of 2004. Sales for the second quarter of 2005 were $82.1 million, up 16% from sales of $70.8 million in the year-earlier quarter. For the first six months of fiscal 2005, income from continuing operations was $5.456,000, or $0.43 per diluted share, compared with income from continuing operations of $5,463,000, or $0.43 per diluted share, for the first half of 2004. Sales for the first six months of 2005 were $154.1 million, up 14% from sales of $135.2 million in the prior-year period. Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, "While we are pleased that our revenue grew 16% and operating income improved 13%, higher interest expense and lower other income resulted in income from continuing operations that was only slightly ahead of the second quarter last year. The improved revenue reflected an 18% year-over-year increase in carpet sales for the second quarter and first six months of 2005. Sales of our residential carpet grew 19% and our commercial carpet sales rose 17% during these periods. "Gross profit and operating income dollars improved in the second quarter and first half of 2005 as a result of higher sales volume; however, as a percentage of sales, gross profit and operating income were lower in 2005 due to higher costs for raw materials, energy and manufacturing. Although we increased prices to offset higher raw material and energy expenses, there was a significant timing lag in this implementation, but we believe these increases are now in place. "During April 2005, order entries in our Masland Residential, Masland Commercial and Dixie Home businesses increased 51% over the prior-year levels. This unusual escalation in business activity increased complexities and created a number of operational issues that resulted in fewer shipments from inventory, longer lead times, and greater difficulties in shipping on time. "In response, we added staff, lengthened operating schedules, and accelerated our move into a new distribution facility. As a result, manufacturing costs were affected by unusually high amounts of overtime, staffing and training expense, and the costs associated with the move of inventory and staff to our new distribution center. LIFO inventory liquidations that increased prior-year gross profit by 0.4% for the second quarter and 1% for the first six months also affected the year-over-year comparisons. "Interest expense increased approximately $500,000 in the second quarter 2005 compared with the same period in 2004, principally due to market gains related to an interest rate hedge that reduced interest expense in the year-earlier period. "Our order entry dropped to levels below our expectations in May, June and July due to extended delivery dates; nevertheless, order entries remained above last year. We have been able to increase inventories so that we are now shipping from inventory at historical rates, and we are seeing improvements that make us optimistic about a strong fall season," Frierson concluded. Results of discontinued operations reflected a loss of $95,000, or $0.01 per diluted share, for the second quarter of 2005, compared with a loss of $38,000, or less than $0.01 per diluted share, for the second quarter of 2004. For the first six months, discontinued operations reflected a gain of $327,000, or $0.02 per diluted share, compared with a loss of $298,000, or $0.02 per diluted share, in the year-earlier period.

Related Topics:Masland Carpets & Rugs, The Dixie Group

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