Despite a 41% drop in commercial carpet sales from a year ago, the Dixie Group Inc. returned to profitability in the third quarter through improved residential flooring sales and reduced debt.
The Dalton, Georgia-based carpet manufacturer said Thursday it earned $906,000, or 6 cents per share, from continuing operations in the three months ended Sept. 30. In the same period a year ago, Dixie lost nearly $2.6 million, or 16 cents per share.
Profits improved even though overall company sales fell 10% from $95.4 million in the third quarter of 2019 to $85.9 million in the third quarter of this year as the coronavirus continued to limit commercial flooring activity this year.
Subsequent to the end of the third quarter, Dixie entered into a new $75 million, five-year, Senior Revolving Credit Facility, and also closed on two additional long term, fixed rate, asset-backed loans in the total amount of $25 million. The company said it has reduced its debt by $50 million in the past 12 months.
Directors of Dixie Group also approved the repurchase of up to $2.9 million of the Company's common stock, which helped to boost pre-market share prices for Dixie on the Nasdaq Exchange.
"We believe these transactions, together with significant operational improvements, put the Company in a much stronger position going forward," Dixie CEO Dan Frierson said in the earnings report for the third quarter. "We are still assessing the long-term impacts of the COVID-19 crisis on our markets and operating practices. We are encouraged by the improvement we have seen in sales, but as a resurgence of COVID-19 cases has been seen in many parts of the country and as government authorities reassess their decisions to lift the restrictions in their jurisdictions, we are cautious as to what the remainder of the year may look like."
In the third quarter, sales of carpets, rugs and hard flooring surfaces in homes continued to recover from the impact of the COVID-19 pandemic. Sales of Dixie's residential products were up 3% for the third quarter, which was about double the industry-wide gain of about 1.5% in the summer period.
But commercial flooring sales for Dixie were down 41% from a year ago, which the company said compares with an estimated 25% drop in overall commercial flooring sales in the industry as a whole.
"We believe the recovery will be longer coming and not as dynamic as the residential market recovery," Frierson said.
Shares of Dixie's stock, which have fallen 14% so far in 2020, were trading higher Thursday in pre-market activity after the earnings report was released.
-- Compiled by Dave Flessner