The Dixie Group said Thursday it sold its AtlasMasland commercial business for $20.5 million to Mannington Mills Inc.
The Chattanooga-based carpet and floorcovering manufacturer, which announced the sale in June but disclosed the terms on Thursday, said it will retain its commercial business' cash deposits, accounts receivable and some inventory and equipment valued at $7 million. That brings the effective sales price for the commercial carpet line to $27.5 million.
Dixie also said it will retain its Atmore and Saraland production facilities for residential floorcovering operations.
"As a result of the transaction, the company has effectively exited the commercial market and will now focus exclusively on its residential floorcovering business," Dixie CEO Dan Frierson said in an announcement of the sale Thursday.
The sale proceeds will help Dixie pare its debt by about $20 million.
"We believe this continues to strengthen the balance sheet of the company," Frierson said. "We also believe the sale of the commercial business will have a favorable impact on the operating results for the company."
Frierson said the profitability of Dixie in the first half of 2021 is estimated to have been improved by approximately $2.5 million with the direct revenues and expenses related to the sale of the commercial business. That should offset the impact from higher raw material costs so far this year, Frierson said.
The sale of the commercial carpet business will trim company revenues by about $60 million "but make the company a nimble, supper-end residential floorcoveirng manufacturer with a growing business," according to Floor Focus daily publisher Kemp Harr.
Frierson said retaining some of the plant facilities at its Atmore and Sarland facilities will help Dixie to grow its residential business and gain market share.
"We will be able to increase our yarn and tufting capacity to service the growth we are experiencing, and expect to continue seeing, in the residential market," Frierson said. "For the first 11 weeks of the third quarter, our residential sales and orders are up more than 25% from the same period of a year ago. Year to date our residential business is up 45% from last year's level."
Dixie shares traded up more than 9.2% in after hours trading after the deal was announced Thursday.
— Compiled by Dave Flessner