DIXIE GROUP INC
For the period ended Jun 29, 2024. Filed Aug 9, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 29, 2024 · Filed Aug 9, 2024
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-30; filed 2024-05-03.
0000029332-24-000036
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-29; filed 2024-08-09.
0000029332-24-000050
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 43 previous paragraphs and 70 current paragraphs.
21 unchanged; 18 reworded; 21 added; 4 removed; 0 previous and 10 current paragraphs rearranged.
Tables are not compared: 2 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
Our business is sensitive to macroeconomic events in the United States. High interest rates, delayed consumer discretionary spending due to inflationary pressures, and other macroeconomic factors continue to impact new home construction and residential renovation and remodeling activity. Residential remodeling is a primary sales driver of flooring products, and most flooring is replaced before a home is listed for sale or just after a home purchase is completed. The current housing market conditions have suppressed remodeling activity as home sales remain soft. Housing turnover rates remain suppressed due to high home mortgage rates and consumers continue to face a higher cost of living and delay discretionary spending on large durable goods purchases such as flooring. We have, to some extent, offset the impact of a soft housing market and decreased renovation activity through cost containment, productivity and lower input costs. Due to low housing availability, aging stock and greater household formation, we believe demand in our markets will accelerate when interest rates decline. We believe that a number of circumstances may influence trends in 2024, including the impact of inflation and higher interest rates, but the extent and duration of such impact cannot be predicted.
Current report
We received notice from NASDAQ on September 27, 2023 that our closing bid price was below $1 per share for 30 consecutive business days. We have requested, and have been granted, an additional 180 calendar days from March 25, 2024 to meet the applicable minimum bid price requirement. As a result of the extension, we now have until September 23, 2024 to regain compliance with the bid price requirement. We will continue to monitor the closing bid price and will consider all available options to regain compliance. If we do not regain compliance with the bid price requirement by September 23, 2024 NASDAQ will provide notification that our shares will be subject to delisting. At such time, we may appeal the delisting determination to a NASDAQ Hearings panel. We would remain listed pending the panel's decision. There can be no assurance that if we appeal a subsequent delisting determination that such appeal would be successful.
Current report
Other Operating Income, Net
Current report
Net other operating income was $105 thousand of income in the second quarter of 2024 compared with $234 thousand of income in the second quarter of 2023.
Current report
Operating Income
Current report
Net Income (Loss)
Current report
Table of Contents 23
Current report
Six Months Ended June 29, 2024 Compared with the Six Months Ended July 1, 2023
Current report
Net Sales from Continuing Operations
Current report
Gross Profit
Current report
Selling and Administrative Expenses
Current report
Other Operating Income, Net
Current report
Operating Income
Current report
We reported operating income of $1.4 million in the first six months of 2024 compared with operating income of $560 thousand in the first six months of 2023. The increase in operating income was primarily the result of operational efficiencies as the result of facility consolidations in the first six months of 2024 and lower selling expenses.
Current report
Table of Contents 24
Current report
Interest Expense
Current report
Other (Income) Expense, Net
Current report
Net other (income) expense was $8 thousand of expense in the first six months of 2024 compared with $10 thousand of income in the first six months of 2023.
Current report
Income Tax Provision
Current report
Net Income (Loss)
Current report
We received notice from NASDAQ on September 27, 2023 that our closing bid price was below $1 per share for 30 consecutive business days. We have requested, and have been granted, an additional 180 calendar days from March 25, 2024 to meet the applicable minimum bid price requirement. As a result of the extension, we now have until September 23, 2024 to regain compliance with the bid price requirement. We will continue to monitor the closing bid price and will consider all available options to regain compliance. If we do not regain compliance with the bid price requirement by September 23, 2024 NASDAQ will provide notification that our shares will be subject to delisting. At such time, we may appeal the delisting determination to a NASDAQ Hearings panel. We would remain listed pending the panel's decision. There can be no assurance that if we appeal a subsequent delisting determination that such appeal would be successful. To the extent that we are unable to stay in compliance with the relevant NASDAQ bid price listing rule, there is a risk that our common stock may be delisted from NASDAQ, which would adversely impact liquidity of our common stock and potentially result in even lower bid prices for our common stock.
Removed paragraphs (4)
Previous report
Table of Contents 20
Previous report
Other Operating Expense, Net
Previous report
Operating Income (Loss)
Reworded paragraphs (18)
Previous wording
Historically, we participated in the upper end specified commercial flooring marketplace through our Atlas | Masland Contract brand. On September 13, 2021, we sold our Commercial business. The results of our Commercial business activity are included in discontinued operations in the included financial statements.
Current wording
Historically, we participated in the upper end specified commercial flooring marketplace through our Atlas | Masland Contract brand. On September 13, 2021, we sold our Commercial business. The results of our Commercial business activity are included in discontinued operations in the included consolidated condensed financial statements.
Previous wording
The following tables provide information derived from our unaudited condensed consolidated financial statements for the periods indicated. Percentages used are expressed as a percent of net sales. The discussion that follows each table should be read in conjunction with our unaudited condensed consolidated financial statements as well as our 2023 Annual Report on Form 10-K for the year ended December 30, 2023.
Current wording
The following tables provide information derived from our unaudited condensed consolidated financial statements for the periods indicated. Percentages used are expressed as a percent of net sales. The discussion that follows each table should be read in conjunction with our unaudited consolidated condensed financial statements as well as our 2023 Annual Report on Form 10-K for the year ended December 30, 2023.
Previous wording
For the first quarter of 2024, our net sales from continuing operations decreased 2.7% compared with the first quarter of 2023. The lower net sales were attributed to lower demand within the floorcovering industry and related markets driven by continued high interest rates and inflation.
Current wording
For the second quarter of 2024, our net sales from continuing operations decreased 4.7% compared with the second quarter of 2023. The lower net sales were attributed to lower demand within the floorcovering industry and related markets driven by continued high interest rates and inflation.
Previous wording
Gross profit as a percentage of net sales was 24.2% in the first quarter of 2024 compared with 26.6% in the first quarter of 2023. The lower gross profit percentage in 2024 was primarily driven by lower sales demand that resulted in higher unabsorbed fixed costs in manufacturing during the quarter. The higher gross profit percentage in 2023 was primarily driven by decreases in raw material costs, headcount reductions and operational efficiencies as the result of facility consolidations.
Current wording
Gross profit as a percentage of net sales was 28.1% in the second quarter of 2024 compared with 26.7% in the second quarter of 2023. The higher gross profit percentage in 2024 was primarily driven by operational efficiencies as the result of facility consolidations.
Previous wording
Selling and administrative expenses were $16.4 million, or 25.1% of net sales, in the first quarter of 2024 compared with $16.4 million, or 24.5% of net sales in the year earlier period. Selling and administrative expenses as a percentage of net sales increased in the first quarter of 2024 as compared to the first quarter of 2023 primarily due to lower sales volume in the first quarter of 2024.
Current wording
Selling and administrative expenses were $17.4 million, or 24.6% of net sales, in the second quarter of 2024 compared with $19.0 million, or 25.7% of net sales in the year earlier period. Selling and administrative expenses as a percentage of net sales decreased in the second quarter of 2024 as compared to the second quarter of 2023 primarily due to lower sample and marketing expenses in the second quarter of 2024.
Previous wording
We reported an operating loss of $857 thousand in the first quarter of 2024 compared with operating income of $306 thousand in the first quarter of 2023. The decline in operating income was primarily the result of lower sales volume that resulted in higher unabsorbed fixed costs during the first quarter of 2024.
Current wording
We reported operating income of $2.3 million in the second quarter of 2024 compared with operating income of $253 thousand in the second quarter of 2023. The increase in operating income was primarily the result of operational efficiencies as the result of facility consolidations in the second quarter of 2024.
Previous wording
Interest expense decreased $326 thousand in the first quarter of 2024 compared with the first quarter of 2023. The decrease is primarily the result of a lower debt level in 2024 offset by an increase in interest rates on our variable rate debt.
Current wording
Interest expense decreased $229 thousand in the second quarter of 2024 compared with the second quarter of 2023. The decrease is primarily the result of a lower debt level in 2024 offset by an increase in interest rates on our variable rate debt.
Previous wording
Net other (income) expense was $5 thousand of expense in the first quarter of 2024 compared with $14 thousand of income in the first quarter of 2023.
Current wording
Net other (income) expense was $4 thousand of expense in the second quarter of 2024 compared with $3 thousand of income in the second quarter of 2023.
Previous wording
We recorded an income tax expense from continuing operations of $16 thousand in the first quarter of 2024 compared to a income tax expense of $13 thousand in the first quarter of 2023.
Current wording
We recorded an income tax expense from continuing operations of $4 thousand in the second quarter of 2024 compared to a income tax expense of $21 thousand in the second quarter of 2023.
Previous wording
The effective income tax rate for the three months ending March 30, 2024 was 0.67% compared with a income rate of 0.85% for the three months ending April 1, 2023. Because we maintain a full valuation allowance against our deferred tax balances, we are only able to recognize refundable credits and a small amount of state taxes in the tax expense for the first quarter of 2024 and 2023. We are in a net deferred tax liability position of $91 thousand at March 30, 2024 and December 30, 2023, which is included in other long-term liabilities in our consolidated condensed balance sheets.
Current wording
The effective income tax rate for the three months ending June 29, 2024 was 0.60% compared with a income rate of 1.31% for the three months ending July 1, 2023. Because we maintain a full valuation allowance against our deferred tax balances, we are only able to recognize refundable credits and a small amount of state taxes in the tax expense for the second quarter of 2024 and 2023. We are in a net deferred tax liability position of $91 thousand at June 29, 2024 and December 30, 2023, which is included in other long-term liabilities in our consolidated condensed balance sheets.
Previous wording
We account for uncertainty in income tax positions according to FASB guidance relating to uncertain tax positions. Unrecognized tax benefits were $562 thousand and $555 thousand at March 30, 2024 and December 30, 2023, respectively. Such benefits, if recognized, would affect our effective tax rate. There were no significant interest or penalties accrued as of March 30, 2024 and December 30, 2023.
Current wording
We account for uncertainty in income tax positions according to FASB guidance relating to uncertain tax positions. Unrecognized tax benefits were $569 thousand and $555 thousand at June 29, 2024 and December 30, 2023, respectively. Such benefits, if recognized, would affect our effective tax rate. There were no significant interest or penalties accrued as of June 29, 2024 and December 30, 2023.
Previous wording
Net other operating expense was $52 thousand of expense in the first quarter of 2024 compared with $68 thousand of expense in the first quarter of 2023. The decrease in other operating expense was a result of lease revenue from excess warehouse capacity in 2024.
Current wording
Net other operating income was $52 thousand of expense in the first six months of 2024 compared with $166 thousand of expense in the first six months of 2023.
Previous wording
Facility consolidation and severance expenses in the first quarter of 2024 were $242 thousand compared with $1.1 million in the first quarter of 2023. The expenses in the first quarter of 2024 and 2023 were related to our restructuring plan for the consolidation of our east coast manufacturing.
Current wording
Facility consolidation and severance expenses in the first six months of 2024 were $489 thousand compared with $1.8 million in the first six months of 2023. The expenses in 2024 and 2023 were related to our restructuring plan for the consolidation of our east coast manufacturing.
Previous wording
Continuing operations reflected a loss of $2.5 million, or $0.16 per diluted share, in the first quarter of 2024 compared with a loss of $1.8 million, or $0.11 per diluted share, in the same period in 2023. The loss from discontinued operations was $84 thousand in the first quarter of 2024 compared to a loss of $207 thousand in the first quarter of 2023. See Note 20 to the consolidated condensed financial statements for additional details related to discontinued operations.
Current wording
Continuing operations reflected a loss of $1.7 million, or $0.12 per diluted share, in the first six months of 2024 compared with a loss of $3.1 million, or $0.22 per diluted share, in the same period in 2023. The loss from discontinued operations was $148 thousand in the first six months of 2024 compared to a loss of $313 thousand in the first six months of 2023. See Note 20 to the consolidated condensed financial statements for additional details related to discontinued operations.
Previous wording
During the three months ended March 30, 2024, cash used in operating activities in continuing operations was $3.4 million. An increase in accounts receivable used $4.6 million during the first three months of 2024. Prepaid and other current assets used $5.2 million primarily as a result of deferred sample and marketing expenses. A decrease in inventory generated $1.2 million and an increase in accounts payable and accrued expenses generated $5.9 million primarily driven by the quarter end timing of payments based on supplier terms.
Current wording
During the six months ended June 29, 2024, cash used in operating activities in continuing operations was $2.3 million. An increase in accounts receivable used $4.4 million during the first six months of 2024. Prepaid and other current assets used $5.3 million primarily as a result of prepaid sample and marketing expenses. A decrease in inventory generated $80 thousand and an increase in accounts payable and accrued expenses generated $5.4 million primarily driven by the quarter end timing of payments based on supplier terms.
Previous wording
Purchases of capital assets for the three months March 30, 2024 resulted in a $499 thousand cash out flow to the business. Depreciation and amortization for the three months ended March 30, 2024 were $1.5 million. We expect capital expenditures to be approximately $2.8 million in 2024 while depreciation and amortization is expected to be approximately $6.2 million.
Current wording
Purchases of capital assets for the six months June 29, 2024 resulted in a $1.4 million cash out flow to the business. Depreciation and amortization for the six months ended June 29, 2024 were $3.3 million. We expect capital expenditures to be approximately $2.8 million in 2024 while depreciation and amortization is expected to be approximately $6.2 million.
Previous wording
During the three months ended March 30, 2024, cash provided by financing activities was $3.9 million. We had net borrowings on our revolving credit facility of $3.1 million and net payments on notes payable and financing leases of $1.2 million.
Current wording
During the six months ended June 29, 2024, cash provided by financing activities was $3.8 million. We had net borrowings on our revolving credit facility of $5.6 million and net payments on notes payable and financing leases of $2.3 million.
Previous wording
We believe, after having reviewed various financial scenarios, our operating cash flows, credit availability under our revolving credit facility and other sources of financing are adequate to finance our anticipated liquidity requirements under current operating conditions. We have specifically considered the impact of continued operating losses on our liquidity position and our ability to comply with financial covenants by our primary lenders. As part of our evaluation, we considered the improved gross margins driven by cost reductions implemented under our East Coast Consolidation Plan, the return from the elimination of cash discounts, lower planned sample investments and cost savings expected to be generated from the operations of our extrusion equipment. Availability under our Senior Secured Revolving Credit Facility on March 30, 2024 was $15.0 million. Significant additional cash expenditures above our normal liquidity requirements, significant deterioration in economic conditions or continued operating losses could affect our business and require supplemental financing or other funding sources. There can be no assurance that other supplemental financing or other sources of funding can be obtained or will be obtained on terms favorable to us. We cannot predict, and are unable to know, the long-term impact of the COVID-19 pandemic and the related economic consequences or how these events may affect our future liquidity.
Current wording
We believe, after having reviewed various financial scenarios, our operating cash flows, credit availability under our revolving credit facility and other sources of financing are adequate to finance our anticipated liquidity requirements under current operating conditions. We have specifically considered the impact of continued operating losses on our liquidity position and our ability to comply with financial covenants by our primary lenders. As part of our evaluation, we considered the improved gross margins driven by cost reductions implemented under our East Coast Consolidation Plan, the return from the elimination of cash discounts, lower planned sample investments and cost savings expected to be generated from the operations of our extrusion equipment. Availability under our Senior Secured Revolving Credit Facility on June 29, 2024 was $13.6 million. Significant additional cash expenditures above our normal liquidity requirements, significant deterioration in economic conditions or continued operating losses could affect our business and require supplemental financing or other funding sources. There can be
Rearranged current paragraphs (10)
Current report — wording carried from elsewhere
Facility consolidation and severance expenses in the second quarter of 2024 were $247 thousand compared with $719 thousand in the second quarter of 2023. The expenses in 2024 and 2023 were related to our restructuring plan for the consolidation of our east coast manufacturing.
Current report — wording carried from elsewhere
Continuing operations reflected income of $667 thousand, or $0.04 per diluted share, in the second quarter of 2024 compared with a loss of $1.6 million, or $0.11 per diluted share, in the same period in 2023. The loss from discontinued operations was $64 thousand in the second quarter of 2024 compared to a loss of $106 thousand in the second quarter of 2023. See Note 20 to the consolidated condensed financial statements for additional details related to discontinued operations.
Current report — wording carried from elsewhere
For the first six months of 2024, our net sales from continuing operations decreased 3.8% compared with the first six months of 2023. The lower net sales were attributed to lower demand within the floorcovering industry and related markets driven by continued high interest rates and inflation.
Current report — wording carried from elsewhere
Gross profit as a percentage of net sales was 26.2% in the first six months of 2024 compared with 26.7% in the first six months of 2023. The lower gross profit percentage in 2024 was primarily driven by higher unabsorbed fixed costs in the first quarter of the year.
Current report — wording carried from elsewhere
Selling and administrative expenses were $33.7 million, or 24.9% of net sales, in the first six months of 2024 compared with $35.5 million, or 25.1% of net sales in the year earlier period. Selling and administrative expenses as a percentage of net sales decreased in the first six months of 2024 as compared to the first six months of 2023 primarily due to lower sample and marketing expenses in the first six months of 2024.
Current report — wording carried from elsewhere
Facility Consolidation and Severance Expenses, Net
Current report — wording carried from elsewhere
Interest expense decreased $555 thousand in the first six months of 2024 compared with the first six months of 2023. The decrease is primarily the result of a lower debt level in 2024 offset by an increase in interest rates on our variable rate debt.
Current report — wording carried from elsewhere
We recorded an income tax expense from continuing operations of $20 thousand in the first six months of 2024 compared to a income tax expense of $34 thousand in the first six months of 2023.
Current report — wording carried from elsewhere
The effective income tax rate for the six months ending June 29, 2024 was 1.16% compared with a income rate of 1.08% for the six months ending July 1, 2023. Because we maintain a full valuation allowance against our deferred tax balances, we are only able to recognize refundable credits and a small amount of state taxes in the tax expense for the first six months of 2024 and 2023.
Current report — wording carried from elsewhere
Table of Contents 25 no assurance that other supplemental financing or other sources of funding can be obtained or will be obtained on terms favorable to us. We cannot predict, and are unable to know, the long-term impact of the COVID-19 pandemic and the related economic consequences or how these events may affect our future liquidity.