Dixie Group Inc

Good day, and welcome to the Dixie Group, Inc. 2026 First Quarter 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. Please go ahead.

Thank you, Christine, and welcome everyone to our First Quarter 2026 Conference Call. With me, I have Alan Danzy, our Chief Financial Officer. Our safe harbor statement is included by reference both to our website and press release. For the first quarter of 2026, the company's net sales were $59,380,000 as compared to $62,990,000 in the same quarter of 2025, or down 5.7%. The company had an operating income of $3,264,000 in the first quarter of 2026, compared to an operating income of $11,000 in the first quarter of the previous year. The net income from continuing operations in the first quarter of 2026 was $1,354,000, or nine cents per diluted share. In 2025, the net loss from continuing operations for the first quarter, was $1,582,000, or 11 cents per diluted share. At this time, Alan will review our financial results, after which I will have additional comments regarding our improved results.

All right. Thank you, Dan. In the first quarter of 2026, the company recognized a receivable for the anticipated refund of the IEPA tariffs that were incurred in 2025 and 2026. The amount of that receivable was $3.3 million, and a corresponding gain was recorded to the cost of goods sold. Without the IEPA tariffs, the gross margin in the first quarter of 2026 was 28.6% as compared to 26.9% in the prior year. The improved margins in 2026, despite the lower year-over-year net sales, was the result of cost reductions and our profit improvement initiatives that were implemented in 2025 and the early part of this year. The savings from our profit improvement plan were also evident in our selling and administrative expenses in the first quarter, which were $878,000 or 5.2% below the prior year. Our net other operating expenses were fairly close year over year, and our interest expense on the quarter was $1.9 million compared to $1.5 million in the prior year due to higher internal interest rates and financing expenses year over year. The net income on the quarter, inclusive of the IEPA tariff receivable, was $1.2 million compared to a net loss of $1.7 million in the prior year. On our balance sheet, our quarter-end net receivables, excluding the IEPA tariff receivable, was $26.6 million compared to the prior year-end balance of $23 million. This increase was driven by higher sales activity in the final month of the first quarter compared to the year-end. Our net inventory balance was also up over year-end at $68.1 million in Q1 of 2026 compared to $66.4 million at the year-end 2025. Accounts payable and accrued expenses were $43.1 million compared to $38.8 million at the end of the previous year, and that was a result of the higher purchases of raw materials and inventory as we entered the seasonally stronger second quarter. Net property, plant, and equipment decreased by $1.1 million from prior year, and this included $1.2 million in depreciation on the year. Capital expenditures were approximately $59,000 on the quarter. The debt on a balance sheet increased by $2.1 million from year-end. Our balance for term debt decreased by $0.5 million. Our availability to borrow today under our senior credit facility is estimated to be approximately $10.2 million, which is subject to a $6 million excess availability requirement. Our investor presentation is available on our website at dixiegroup.com. Dan?