Dixie’s 4Q Earnings Off

Chattanooga, TN, February 27, 2007--The Dixie Group in the fourth quarter of 2006 reported net income, including discontinued operations, of $3.3 million, or $0.25 per diluted share, compared with $3.1 million or $0.24 per diluted share, for the fourth quarter of 2005. 

Sales in the fourth quarter were down 8.5% to $80.3 million verses $87.8 million in the year-earlier quarter.

Analysts had forecast earnings per share of $0.26 for the fourth quarter on sales of $85.6 million.

For 2006, net income was $7.7 million, or $0.59 per diluted share, compared with net income of $10.1 million, or $0.79 per diluted share, in 2005.

Sales for 2006 were $331.1 million, up 3.9% from sales of $318.5 million in the prior year.

For the year analysts had forecast earnings of $0.76 per share on sales of $336.4 million.

Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said,

"Our sales were negatively affected by weakness in the carpet industry and one less operating week in the 2006 periods compared with those in the prior year. Adjusted for the extra operating week in 2005, fourth quarter 2006 sales of carpet products declined 1.2% in dollars and 4.8% in units. For the full-year 2006, carpet sales, adjusted for the extra week, rose 6.7% in dollars and 7.9% in units. Despite the weakness we are experiencing in our business, our carpet sales continued to outpace the industry's sales by a significant margin.

During the fourth quarter industry sales declined 7.7% in dollars and 10.1% in units. For the full-year 2006, industry-wide sales were down 0.6% in dollars and 6.5% in units.

Frierson said, "The progress we made in improving the quality of our products and the efficiency of our manufacturing operations is reflected in our fourth quarter results. Despite sales weakness and costs related to the start-up of our modular/carpet tile operation, gross margins, as a percent of sales, were the highest they have been since the second quarter of 2005. Control of discretionary spending reduced selling and administrative expenses, both in dollars and as a percentage of sales, compared with the fourth quarter and full year 2005.

"Carpet sales in the first eight weeks of 2007 were approximately 4% below year-earlier levels. Our sales were very soft in January, but sales in February were ahead of the same period in the prior year. We expect new product introductions to drive sales growth in 2007 and beyond. Sales of the modular/carpet tile products we introduced last year are building and now are expected to be approximately $1.0 million in the first quarter of this year.

On the residential side of our business, Dixie Home is introducing its new Dixie Home and Office collection of Stainmaster(R) commercial products that will be sold through retail stores. Masland and Fabrica both are introducing wool collections later this year. Sales comparisons in the first quarter of this year will be difficult due to the general weakness the carpet industry is experiencing. The trends we are seeing, however, lead us to believe that our revenue will grow for the full-year 2007, and we expect our sales to continue to outperform the carpet industry. At this time, it is difficult to predict the rate at which our sales will grow," Frierson concluded.

Results of discontinued operations reflected income of $72,000, or less than $0.01 per diluted share, for the fourth quarter of 2006, compared with a loss of $122,000, or $0.01 per diluted share, for the fourth quarter of 2005.

For 2006 as a whole, the loss from discontinued operations was $2,064,000, or $0.16 per diluted share, compared with income of $173,000, or $0.02 per diluted share, in the year-earlier period.

The loss from discontinued operations in 2006 was primarily related to settlement expenses for a legacy defined benefit pension plan that was terminated in June of 2006.

Related Topics:Masland Carpets & Rugs, The Dixie Group