DALTON, Ga., Feb. 04, 2019 (GLOBE NEWSWIRE) — The Dixie Group, Inc. (“the Company”) (Nasdaq: DXYN) has updated its previously announced profit improvement plan to reflect further cost reductions and additional charges associated with the plan’s implementation. The Company has committed to the updated plan as part of its continuing efforts to improve efficiencies and streamline operations to more closely align its operating structure with its business and value creation strategy. The updated plan increased estimated cost reductions by $6.0 million to a total of $17.1 million.
Commenting on the revised plan, Daniel K. Frierson, Chairman and Chief Executive Officer, said, “We updated the plan after a review of all departments and operations to speed our return to profitability. The updated plan involves (i) a reduction of an additional 46 positions, bringing the total headcount reduction to approximately 329 positions since the beginning of 2018 or 17% of our workforce, (ii) additional write-down of certain obsolete, underutilized and impaired inventories, manufacturing and intangible assets and (iii) the previously announced closure of two of our commercial manufacturing operations and consolidation of those activities into other facilities. We will have incurred substantially all of the costs of implementing the revised plan by the end of the first quarter with anticipated ongoing cost reductions being substantially realized by the third quarter of 2019.”
In connection with the revised plan, the Company expects to incur a pre-tax restructuring and asset impairment charge in the fourth quarter of 2018 of approximately $6.1 million and further charges in early 2019 of approximately $2.1 million. The cost of the entire plan is estimated to be approximately $11.1 million, comprised of severance expenses ($2.0 million), facility shutdown expenses ($780 thousand), equipment relocation and infrastructure changes ($3.1 million), inventory impairments ($2.7 million) and non-cash impairment of equipment and intangible assets ($2.5 million). In its current form, the restructuring plan is expected to be substantially complete in the first quarter of 2019. The plan is expected to yield gross annual cost reductions, once fully implemented later in 2019, of approximately $17.1 million as compared to our previous estimate of $11.1 million as detailed below.
| Plan | Total Costs Incurred as of 9-29-2018 |
Costs Incurred during Q4 2018 |
Total Costs Incurred as of 12-29-2018 |
Total Anticipated Costs |
| Profit Improvement Plan | 1,565 | 2,228 | 3,793 | 5,906 |
| Asset Impairments | 349 | 2,131 | 2,480 | 2,480 |
| Inventory Impairments in cost of sales | 963 | 1,738 | 2,701 | 2,701 |
| Total Cost | 2,877 | 6,097 | 8,974 | 11,087 |
| Plan | Total Cost Reductions as of 9-29-2018 |
Additional Cost Reductions |
Total Cost Reductions anticipated as of 2-5-2019 |
|
| Profit Improvement Plan | 11,124 | 5,626 | 16,750 | |
| Asset Impairments | 0 | 305 | 305 | |
| Total All Plans | 11,124 | 5,931 | 17,055 |
Statements in this news release, which relate to the future, are subject to risk factors and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements. Such factors include the possibility that negotiations will not be successful, that contract terms will not be as expected, and that levels of demand for the products produced by the Company will change. Other factors that could affect the Company’s results include, but are not limited to, raw material and transportation costs related to petroleum prices, the cost and availability of capital, and general economic and competitive conditions related to the Company’s business. Issues related to the availability and price of energy may adversely affect the Company’s operations. Additional information regarding these and other risk factors and uncertainties may be found in the Company’s filings with the Securities and Exchange Commission.
CONTACT:
Jon Faulkner
Chief Financial Officer
706-876-5814
jon.faulkner@dixiegroup.com