CONTACT: Jon Faulkner
Chief Financial Officer
THE DIXIE GROUP REPORTS 2016 RESULTS
CHATTANOOGA, Tenn. (March 6, 2017) -- The Dixie Group, Inc. (NASDAQ:DXYN) today reported financial results for the year ended December 31, 2016. For 2016, the Company had net sales of $397,453,000, a 5.9% decrease versus fiscal 2015’s net sales of $422,483,000. Fiscal 2016 was a 53 week period while Fiscal 2015 had 52 weeks in the period. On a comparable 52 week basis, net sales for 2016 were down 7.2% as compared to 2015. For 2016 the Company had a loss from continuing operations of $5,207,000, or $0.33 per diluted share, as compared to the fiscal year of 2015 when the Company had a loss from continuing operations of $2,278,000, or $0.15 per diluted share. For the fourth quarter the loss from continuing operations was $0.17 per share for 2016 as compared to a loss of $0.03 per share for the same period in 2015.
Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, “Our carpet sales for 2016 were down 6.0% from 2015, on a comparable 52 week basis, while the industry, we believe, was down in the low single digits. In the fourth quarter our total carpet sales were down 7.7% while the industry was flat. Sales of our residential products were down approximately 3% on a comparable 52 week basis in 2016 versus 2015 while the industry was down similarly. Our commercial product sales on a year over year basis were down over 11% while the industry was down slightly, also on a 52 week equivalent basis.
For the year, gross profit was 24.0% of net sales, a decline from 2015’s 25.1% gross profit percentage. The drop in sales year over year severely impacted our bottom line. Further, the decline in margins in both the first and fourth quarters were impacted by our reducing inventories by $17.9 million during 2016 as we under produced our sales volume, thus negatively affecting our cost absorption during these time periods. In order to service our customers, we had increased our inventory levels over the last few years as we were restructuring the plants; now, however, we are operating more efficiently and have not needed these levels of inventory to properly service our customers. Now that our inventories are back in line, we anticipate the first quarter to have production above sales. During the fourth quarter of 2016, we increased inventory reserves as we dropped older product lines and reduced the market price of our distressed goods resulting in significant negative inventory expenses during the quarter. Selling and administrative expenses for the year were 24.4% of net sales as compared to 23.8% for the prior year, despite having dropped the absolute levels of spending by $3.4 million from 2015 to 2016.
Our interest expense for the year was $5.4 million as compared to $4.9 million in 2015. The higher interest expense is largely due to higher rates as we had previously locked in future interest rate swaps from 2016 until 2021 to fix the interest rate on a portion of our floating rate debt under our asset backed revolver. We had an income tax benefit rate of 41% for the year. Our normal rate going forward, at reasonable levels of profitability, should be in the 35% range. For the year of 2016, our receivables dropped $7.2 million on the lower sales volume. Our inventories declined by $17.9 million as previously explained. Capital equipment acquisitions, including those funded by cash and financings, were $5.3 million for the year. Depreciation and amortization for the year was $13.5 million. We anticipate capital expenditures for 2017 of approximately $8 million and depreciation and amortization of approximately $13.3 million. Our debt declined by $17.7 million to $108.4 million at the end of the year.
The following information was filed by Dixie Group Inc (DXYN) on Monday, March 6, 2017 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.