The Dixie Group, Inc. (NASDAQ:DXYN) today reported financial results for the second quarter ended June 30, 2012. In the second quarter of 2012, the Company had sales of $66,566,000 and a loss from continuing operations of $404,000, or $0.03 per diluted share, compared with income from continuing operations of $808,000, or $0.06 per diluted share for the second quarter of 2011. Net sales decreased 3.8% for the fiscal second quarter of 2012, compared with the second quarter of 2011. Year-to-date sales were $129,416,000, and a loss from continuing operations of $508,000 or $0.04 per diluted share, compared with sales of $135,154,000 and income from continuing operations of $1,452,000 or $0.11 per diluted share, for the year-ago period. Net sales for the year-to-date were 0.8% below the same period of 2011 when adjusting for the number of weeks in the two periods.
Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, “Dixie had strong residential product growth in the quarter with 5.6% improvement in sales compared to a decline for the industry. Our commercial products, however, declined against a strong period a year ago. The industry, we believe, had growth commercially during the quarter. Notable was growth in our upper-end residential segments with over 11% sales increase, excluding sales to mass merchants. Favorable activity early in the year slowed as we got later into the quarter. We expect this slower pace to continue throughout the summer months.
“Our strategy of continuing to invest in new products during this slow economic recovery has proven successful, and we will continue to do so with the launch this quarter of both our line of Stainmaster ® TruSoft™ products, as well as our new “permaset” wool dyeing process. Dixie is one of only two suppliers to deliver TruSoft™, the new standard in softness, to the market this year. We have made substantial investments in the launch of this new fiber system and the series of products that will be offered in all of our brands. With the new “permaset” dyeing process, offering unlimited color selection to the high-end design community in wool products, we hope to build upon the double digit growth we experienced this past quarter in all of our wool product lines. We hope our mass merchant segment, down from a very strong period a year ago, will see growth later in the year as we introduce new products through this channel. In an effort to strengthen our performance in the commercial sector, we will be bringing in new leadership for our commercial business. We have developed and are launching, in addition to the new Chrome Collection, a new series of value oriented commercial products to the design community. Despite our sales slowing in the second quarter relative to expectations, we will continue to invest in new products in both the residential and commercial markets to accelerate growth during this difficult economic recovery.
“Our gross profit during the quarter was 23.6% versus 24.2% a year ago. In an effort to further develop our tufting centers of excellence, and last year establishing our wool center of excellence in Santa Ana, we continue to move equipment into our Eton facility to establish a focus on residential pattern goods while having our Atmore facility to further concentrate on the commercial marketplace. We have seen improvements in efficiencies in both locations even as we are in the process of finalizing these moves over the next several months. We have spent over $500 thousand in the quarter implementing this manufacturing re-alignment, which impacted gross profit margins by 0.8% in the period. Further, we have borne significant operational inefficiencies in the process of launching a number of new products, costs which are largely behind us. We had a price increase in the commercial business only during the quarter, the effect of which will begin to be felt in the third quarter. Further, our selling, general and administrative expenses were impacted by over 1.4% relative to a year ago due to higher sampling expenses associated with new product launches planned for 2012. Our SG&A, at 23.6% of sales, was two percentage points above last year's 21.6% of sales for the second quarter.
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