The Dixie Group, Inc.
Q4 2020 Earnings Call Transcript

Published: 4 Mar 2021

[Operator:]

Good day, and welcome to the Dixie Group, Inc. 2020 Fourth Quarter and Year End Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Chairman and Chief Executive Officer, Dan Frierson. Thank you, sir. Please go ahead.

[Daniel Frierson:]

Thank you, Donna and welcome everyone to our fourth quarter and year end conference call. Our Safe Harbor statement is included and I reference both to our website and press release. As we entered 2020 business was beginning to improve and we were excited about celebrating our 100th anniversary as a company. Over our 100 years, we've experienced many obstacles such as World Wars, the Great Depression, and more recently the Great Recession, but had not endured a pandemic. We like every company were faced with unprecedented issues on virtually every front.

[Allen Danzey:]

Thank you, Dan. And by way of reference an 8-K filing is available on our website containing the statement of operations for the fourth quarter results and also our investor presentation including our non-GAAP information is available on our website. That website is www.thedixiegroup.com.

[Daniel Frierson:]

Thank you, Allen. Not knowing where the COVID-19 pandemic would lead, we implemented our continuity plan to maintain the health and safety of our associates preserve cash and minimize the impact on our customers. To minimize and prevent cases of COVID-19 exposure in our facilities, we've taken measures aimed at sanitation and safety including large scale COVID-19 testing, mandatory temperature checks prior to starting work, requirements to wear masks when unable to maintain social distancing and deep cleaning and sanitation. We limited travel for our associates, all of our associates, implemented work from home options where appropriate, limited physical contact with our customers. We reduced our running schedules and our facilities to below demand to maintain order flow to our customers, while simultaneously reducing inventories to align them with lower customer demand and preserve cash. Also to preserve cash, we placed a large percentage of our associates either on rotating layoff or furlough. We implemented approximately 14 million in spending reductions for the current year. These reductions included, deferring maintenance when possible, reduce capital expenditures, instituting select job eliminations and temporary salary reductions. We deferred new product introductions and reduced sample and marketing expenses. We work with suppliers, lenders and landlords to extend payments in the second quarter, not knowing what the impact of COVID would be.

[Operator:]

Thank you. Ladies and gentlemen, the floor is now open for questions. Our first question today is coming from Barry Gartner of Improverb . Please go ahead.

[Unidentified Analyst:]

Hi, how are you? Good morning. Two questions -

[Daniel Frierson:]

Good morning.

[Unidentified Analyst:]

And just two quick questions for you, first one on the operating business, many times the comparables or Mohawk and, and some other ones in having just kept an eye on flooring in general for this past quarter, sales at Mohawk overall were up like 9% quarter-over-quarter. Whereas here it seems like it was I think you said 88.6 or something versus at 85, 92. Is there - can you speak to sort of the disparity or if you felt that there was - how you feel the company did versus the broader market on a top line basis for the quarter?

[Daniel Frierson:]

Barry, let me take a crack at that. Residentially, we were up in the fourth quarter about 15%. Commercially, we were down dramatically. Our backlog had run down and order entry was very slow in the second, third and fourth quarters. That order entry has improved significantly in the first quarter.

[Unidentified Analyst:]

No, that makes sense. I understand that. I totally understood. It was the commercial was just the black box and essentially a black hole was hospitality and whatnot.

[Daniel Frierson:]

Right and I think which segments of commercial you were in. I particularly our hospitality and residential, excuse me, and retail areas were dramatically all.

[Unidentified Analyst:]

Understood and one more question for you guys. I appreciate it. Congrats on the refinancing and I think it's an excellent efficiency in terms of re doing debt structure and taking advantage of the ability there. And if it - I think it was in the Wells Fargo and Bank of America were the prior lenders. So in the - I think it was like the 14th credit amendment, the lenders had offered the ability for Dixie to buy the real estate interest out from Encumbrance. And I was wondering if - I did see that the company had paid down that part. But as part of the broader refinancing, does the company have a view towards the real estate, now that it is not pledged as collateral, or not all the plants are pledged as collateral under the new credit facility.

[Daniel Frierson:]

Let me make a comment. I want Alan to address that. But our current revolver term is with Fifth Third. It includes only inventories and receivables. And we did refinance part of real estate and equipment in the America - with AmeriState and Nevada Credit on the $25 million term loans, which are - one is 10 million, the other 15. Allen, do you want to comment further on?

[Allen Danzey:]

Yeah, exactly, as Dan had said, we did move the assets around on a different loan agreement. And there is still some room under some of our assets that are not falling under the loan agreements that we put in place. However, we're very happy with the transactions that took place at the end of October. It did put us in a strong position from our availability. We do not see an immediate need to be accessing those funds. We'll make the best decisions as opportunities become available. But our focus has been on certainly reducing our debt. And we will continue with that mindset as we go forward and making the best decisions around opportunities that are in front of us.

[Unidentified Analyst:]

Thank you so much, Allen. Thank you, Dan. And once again, congrats on getting your refinancing done. I think it's going to be massively creative to the business going forward, so best of luck and stay safe.

[Daniel Frierson:]

Thank you, Barry, and we agree with.

[Allen Danzey:]

Thanks Barry.

[Operator:]

Thank you. At this time, I'd like to turn the floor back over to Mr. Frierson for any additional or closing comments.

[Daniel Frierson:]

Donna, thank you very much. We appreciate all of you being with us on the year-end conference call. Obviously, 2020 was a most unusual year that we will all remember forever. But I think the good news is we have made it through 2020. We have refinanced the company, financially much stronger than we've ever been before, operationally much stronger than we've ever been. And business in 2021 is - particularly residential businesses after a great start. Thank you very much and see you next quarter.

[Operator:]

Ladies and gentlemen, thank you for your participation and interest in the Dixie Group. You may disconnect your lines or log off the webcast at this time and have a wonderful day.