THE DIXIE GROUP, INC. FORM 10-K (ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934)
The Dixie Group, Inc. filed its annual report on Form 10-K for the fiscal year ended December 28, 2024. The company reported net sales of $444.8 million, a 4.5% increase from the prior year. Gross profit increased 5.1% to $143.1 million, while operating income rose 10.1% to $24.5 million. Net income was $14.3 million, a 12.2% increase from the prior year. The company’s balance sheet showed total assets of $243.1 million, total liabilities of $134.1 million, and shareholders’ equity of $109 million. The aggregate market value of the company’s common stock held by non-affiliates was $8.97 million as of June 28, 2024. The company has 13,997,446 shares of common stock outstanding as of March 27, 2025.
Overview of the Company’s Financial Performance
The Dixie Group, Inc. is a leading manufacturer and marketer of high-end floorcovering products, primarily serving the residential market. The company’s brands include Fabrica, Masland, DH Floors, and TRUCOR. In 2024, the company faced significant challenges, with net sales declining 4.1% to $265 million compared to the prior year. This was driven by lower demand in the floorcovering industry due to continued high interest rates and inflation, which have suppressed new home construction and residential remodeling activity.
Gross profit as a percentage of net sales decreased from 26.7% in 2023 to 24.7% in 2024. This was primarily due to lower sales volume, higher healthcare and utility costs, and additional lease expenses from the sale and leaseback of a distribution center. Selling and administrative expenses decreased by 5.8% in 2024 compared to 2023, mainly due to lower samples, marketing, and administrative compensation costs.
The company reported an operating loss of $5.9 million in 2024, compared to operating income of $5.0 million in 2023. This was driven by the higher costs mentioned above, as well as the absence of the $8.2 million gain from the sale and leaseback of the Adairsville, Georgia distribution center that was recorded in 2023.
The company’s net loss from continuing operations was $12.2 million, or $0.83 per diluted share, in 2024, compared to a net loss of $2.0 million, or $0.13 per diluted share, in 2023. Including discontinued operations, the company reported a net loss of $13.0 million, or $0.88 per diluted share, in 2024 compared to a net loss of $2.7 million, or $0.18 per diluted share, in 2023.
Strengths and Weaknesses
One of the company’s key strengths is its focus on the high-end residential floorcovering market, where it has strong brands and competitive advantages in style, design, and customer relationships. However, the company’s performance is heavily dependent on the macroeconomic conditions in the U.S., particularly the housing market and consumer spending on residential remodeling.
The company’s weaknesses include its inability to maintain compliance with the minimum bid price requirement for continued listing on the Nasdaq exchange, leading to its delisting and transition to trading on the over-the-counter market. This could make it more difficult for the company to raise additional capital if needed.
Additionally, the company identified material weaknesses in its internal control over financial reporting related to the presentation and disclosure of debt, as well as the documentation of its lessor lease accounting evaluation. The company has outlined a remediation plan to address these issues, but the effectiveness of these efforts remains to be seen.
Outlook and Future Prospects
The company’s outlook for the future is uncertain, as it continues to face the challenges of high interest rates, inflationary pressures, and a soft housing market. However, the company believes that demand in its markets will eventually accelerate when interest rates decline, due to low housing availability, aging stock, and greater household formation.
The company’s ability to maintain compliance with its financial covenants under its new $75 million senior secured credit facility with MidCap Financial IV Trust will be crucial. The company’s current forecast projects it may not be able to maintain compliance with certain of these covenants, and while it has been able to obtain waivers in the past, there is no assurance that such waivers will be obtained in the future.
The company’s success will also depend on its ability to effectively implement its cost-cutting measures, including the consolidation of its East Coast manufacturing operations, and to generate additional cost savings from the operations of its extrusion equipment and other initiatives. The company’s management believes that its operating cash flows, credit availability, and other sources of financing are adequate to finance its anticipated liquidity requirements under current operating conditions, but significant additional cash expenditures or further deterioration in economic conditions could affect its business and require supplemental financing or other funding sources.
Conclusion
The Dixie Group, Inc. faced significant challenges in 2024, with declining sales, profitability, and a net loss from continuing operations. The company’s performance was heavily impacted by macroeconomic factors, including high interest rates and inflationary pressures, which have suppressed demand in the residential floorcovering market.
While the company has strengths in its focus on the high-end residential market and its strong brands, it also faces weaknesses in its inability to maintain compliance with Nasdaq’s listing requirements and material weaknesses in its internal control over financial reporting. The company’s future prospects are uncertain, as it navigates the challenges of the current economic environment and works to maintain compliance with its financial covenants and implement cost-cutting measures.
Investors and stakeholders will need to closely monitor the company’s progress in addressing these issues and its ability to adapt to the changing market conditions. The company’s success will depend on its ability to effectively execute its strategies and weather the ongoing economic headwinds.
