Dixie Group, Inc. · OTC:DXYN
Dixie — Investor Presentation (April 2014)
38 slides from Dixie's investor presentation, Apr 30, 2014
Slide 1: April 2014 Investor Presentation
April 2014 Investor Presentation Contact: Jon Faulkner CFO The Dixie Group Phone: 706-876-5814 jon.faulkner@dixiegroup.com Exhibit 99.1
Slide 2: Forward Looking Statements
• Statements in this presentation 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 levels of demand for the products produced by the Company
Slide 3: Dixie History
• Began operations in 1920 • Transitioned from textiles to floorcovering in 1990’s – now 100% floorcovering • Refined focus on upper-end markets in 2004 • For over 90 years we have focused on specialized products • Traditionally we have outperformed the industry and expect to do so in the future 3 D
Slide 4: Dixie Today
Dixie Today • Commitment to brands in the upper- end market with strong growth potential • Diversified between Commercial and Residential markets • Diversified customer base (TTM Basis) – Top 10 carpet customers • 17% of sales – Top 20 carpet customers • 20% of sales 4
Slide 5: New and Existing Home Sales
New and Existing Home Sales Seasonally Adjusted Annual Rate New 1,000 Existing 1,000 Source: National Association of Realtors (existing) and census.gov/const/c25 (new). 5 3,000 3,500 4,000 4,500 5,000 5,500 250 300 350 400 450 500 550 600 Jan '10 July Jan '11 July Jan '12 July Jan '13 Jul Jan '14 •
Slide 6: Residential Remodeling
6 Residential Remodeling Harvard Study Leading Indicator of Remodeling Activity
Slide 7: The Industry versus GDP
7 2014 GDP growth in the second quarter should bounce back to a rate of 2.5% to 3%, from a weather-related and inventory slowdown in the first quarter. Economic activity is still on track to grow 2.7% or better for the year. Kiplinger’s April 3, 2014 The Industry versus GDP
Slide 8: Residential and Commercial Fixed Investment
Residential and Commercial Fixed Investment 8 Rebound in residential activity Rebound in commercial activity 2013 showed a strong rebound in growth; We expect 2014 to continue this trend 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 1 9 69 Q 1 1 9 70 Q 1 1 9 71 Q 1 1 9 7 2 Q 1 1 9 73 Q 1 1 9 74
Slide 9: Consumer Sentiment
9 Consumer Sentiment Conference Board March 2014: “Consumer confidence improved in March, as expectations for the short-term outlook bounced back from February’s decline. “ “Overall, consumers expect the economy to continue improving and believe it may even pick up a little steam in the months a
Slide 10: The Stock Market April 2014
The Stock Market 10 April 2014 The stock market has rebounded beyond pre- recession levels 2014 has had a slight pullback but appears to be on a more stable track of steady growth However, the market is still subject to macro events: Job growth, US policies, China, Ukraine
Slide 11: The Industry as compared to The Dixie Group
The Industry as compared to The Dixie Group 11 Source: U.S. Bureau of Economic Analysis and Company estimates
Slide 12: 2012 U.S. Carpet Manufacturers
2012 U.S. Carpet Manufacturers 12 Source: Floor Focus – includes carpet as broadloom and modular tile, excludes rug sales Carpet Leaders Dollars in Millions % Total Shaw (Berkshire Hathaway) $ 2,996 38.7% Residential & Commercial Mohawk (MHK) $ 1,869 24.2% Residential & Commercial Beaulieu (Private)
Slide 13: U.S. TTM Q1 2014 Carpet Market Sales $10.2 Billion
U.S. TTM Q1 2014 Carpet Market 13 Sales $10.2 Billion Source: Floor Focus – Broadloom & Carpet Tile and Dixie Group estimate Dixie versus the Industry Dixie plus Atlas TTM Q1 2014 on a Pro Forma basis
Slide 14: Carpet Dollar Sales Indexed to 2009
Carpet Dollar Sales Indexed to 2009 14
Slide 15: Carpet Unit Sales Indexed to 2009
Carpet Unit Sales Indexed to 2009 15
Slide 16: Industry Positioning
Industry Positioning The Dixie Group 16 • Strategically our residential and commercial businesses are driven by our relationship to the upper-end consumer and the design community • This leads us to: – Have a sales force that is attuned to design and customer solutions – Be a “product driven company
Slide 17: Residential Market Positioning
Residential Market Positioning The Dixie Group 17 BROADLOOM RESIDENTIAL SALES = $7.0 Billion (2012 $’s) T O T A L M A R K E T : S QUA R E Y A R DS OR S AL E S DO L L A R S ESTIMATED TOTAL WHOLESALE MARKET FOR CARPETS AND RUGS: VOLUME AND PRICE POINTS Positioning of Dixie Brands by Price Point Segmen
Slide 18: High-End Residential Sales by Brand
Dixie Group High-End Residential Sales All Brands 18 Sales by Brand for TTM Q1 2014
Slide 19: High-End Residential Sales by Channel
Dixie Group High-End Residential Sales All Brands 19 Sales by Channel for TTM Q1 2014
Slide 20: Dixie Home brand
• Well-styled moderate to upper priced residential broadloom line – Known for differentiated pattern and color selection • Dixie provides a “full line” to retailers – Sells Specialty and Mass Merchant retailers • Growth initiatives – Stainmaster® Tru Soft TM Fiber Technology – Stainmaster® SolarMax
Slide 21: Masland Residential brand
• Leading high-end brand with reputation for innovative styling, design and color • High-end retail / designer driven – Approximately 27% of sales directly involve a designer • Hand crafted and imported rugs • Growth initiative – Stainmaster® TruSoft™ Fiber Technology – Wool products in both tufted
Slide 22: Fabrica brand
• Premium high-end brand – “Quality without Compromise” • Designer focused – Approximately 39% of sales directly involve a designer • Hand crafted and imported rugs • Growth initiatives – Stainmaster® TruSoft™ Fiber Technology – Fabrica Permaset dyeing process “unlimited color selection in wool” 22
Slide 23: Commercial Market Positioning
Commercial Market Positioning The Dixie Group 23 • We focus on the “high end specified soft floorcovering contract market” • We have positioned our brands to serve this market through: – Our Masland Contract division • Broad product line for diverse commercial markets through a direct sales model –
Slide 24: Masland Contract brand
• Premium brand in the specified commercial marketplace – Corporate, End User, Store Planning, Hospitality, Health Care, Government and Education markets • Designer focused • Strong national account base – Delta Air Lines, Best Buy, Club Corp • Growth initiative – SPEAK and FIT collections – Desso A
Slide 25: Commercial Sales by Channel
25 Sales by Channel for TTM Q1 2014 Channels: Interior Design Specifier and Commercial End User
Slide 26: Atlas brand
• Atlas is our newest brand • Dedicated to servicing the architect and designer for finer goods • Focus is on the corporate market through high fashion broadloom and modular carpet tile offerings • With state-of-the-art tufting machines Atlas can quickly manufacture custom running line products 26
Slide 27: Dixie Group Sales
$331 $321 $283 $205 $231 $270 $266 $345 $372 2006 2008 2010 2012 Q1 2014 Seasonally Adjusted Net Sales (millions) 27 Dixie Group Sales $ in millions
Slide 28: Sales & Operating Income
Sales & Operating Income $ in millions 28 Note: Non-GAAP reconciliation starting on slide 32 Y 2009 Y 2010 Y 2011 Y 2012 Y 2013 YTD 2014 Net Sales 203 231 270 266 345 85 Net Income (Loss) (42.2) (4.7) 1.0 (0.9) 5.3 3.3 Non-GAAP Adjusted Op. Income (8.4) (1.0) 5.1 3.5 16.1 (0.9) Non-GAAP Adjusted EBI
Slide 29: Current Business Conditions
- Operationally we did not perform up to expectations: - The bad weather early in the quarter impacted operations - The slow startup of our Colormaster upgrade increased our costs - One time costs associated with acquisition and joint venture - We did not perform as well operationally and had excess
Slide 30: Current Business Conditions 2014 Initiatives
30 Current Business Conditions 2014 Initiatives • We will consolidate our distribution facilities and streamline our operations in 2014 & 15 in a $2.4 million restructuring plan to lower operating and lease costs and reduce excess freight and waste • We will consolidate the Atlas dye house in 2014 a
Slide 31: Outlook for 2014
Outlook for 2014 The housing & commercial markets have strengthened: • The residential housing markets are continuing their momentum • Commercial market is forecasted to improve (AIA forecast) • Positive market reception to our new products: Masland and Fabrica Wool Collections continued growth
Slide 32: FABRICA
FABRICA FINE CARPE CARPETS&RUGS HOMEP Re KS THE DIXIE GROUP Wri las —
Slide 33: Non-GAAP Information
Non-GAAP Information 33 Use of Non-GAAP Financial Information: The Company believes that non-GAAP performance measures, which management uses in evaluating the Company's business, may provide users of the Company's financial information with additional meaningful bases for comparing the Company's cu
Slide 34: Non-GAAP Gross Profit
34 Non-GAAP Gross Profit Q1 2013 Q1 2014 Net Sales 75,440 85,313 Gross profit 18,412 18,007 Plus: Colormaster Expansion 1,036 445 Plus: Machine Tufted Rug Expansion 157 - Plus: Eton Tufting Facility Startup 110 - Adjusted gross profit 19,715 18,452 Gross profit margin as % of net sales 24.4% 21.1% A
Slide 35: Adjusted Operating Income (Loss)
35 Adjusted Operating Income (Loss) - Note 2 ($ in thousands) Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Net Sales 75,440 83,616 90,211 95,799 85,313 Operating income (loss) 1,677 3,271 1,829 1,813 (2,469) Plus: Facility consolidation and severance expenses - - - - 73 Plus: Impairment of assets - - - 1
Slide 36: Free Cash Flow (FCF)
36 Free Cash Flow (FCF) - Note 5 ($ in thousands) Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Non-GAAP Adjusted EBIT (from above) 1,669 3,166 1,828 1,809 6,265 Times: 1 - Tax Rate = EBIAT 1,035 1,963 1,133 1,122 3,884 Plus: Depreciation and Amortization 2,515 2,559 2,747 2,441 2,988 Plus: Non Cash Impai
Slide 37: Adjusted Operating Income (Loss)
37 Adjusted Operating Income (Loss) - Note 2 Note a: Restated ($ in thousands) 2007 (a) 2008 (a) 2009 (a) 2010 2011 2012 2013 2014 YTD Net Sales 320,795 282,710 203,480 231,322 270,110 266,373 345,066 85,313 Operating income (loss) 16,707 (28,460) (45,389) (2,570) 5,668 1,815 8,591 (2,469) Plus: Fac
Slide 38: Free Cash Flow (FCF)
38 Free Cash Flow (FCF) - Note 5 ($ in thousands) 2007 (a) 2008 (a) 2009 (a) 2010 2011 2012 2013 2014 YTD Non-GAAP Adjusted EBIT (from above) 16,801 (28,134) (45,208) (2,854) 5,426 2,092 8,472 6,265 Times: 1 - Tax Rate = EBIAT 10,417 (17,443) (28,029) (1,769) 3,364 1,297 5,253 3,884 Plus: Depreciati