Dixie Shows First Quarter Loss

Chattanooga, TN, Apr. 29--The Dixie Group, Inc. had a net loss of $336,000, or $0.03 per diluted share, for the first quarter ended March 29, compared with net income of $496,000, or $0.04 per diluted share, for the same period a year ago. The net loss for the quarter resulted from lower-than-expected sales volume and higher costs. Sales for the first quarter were $112.0 million compared with sales of $123.3 million for the same period a year ago. During the quarter, the company refinanced its senior indebtedness and paid the $50 million obligation that was due in April to the former shareholders of Fabrica. Also, in early April, Standard & Poor's raised the company's credit rating to "B+" from "B-." Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, "The first quarter was marked by economic uncertainties, low consumer confidence and severe weather in some areas of the country. These factors appear to have delayed the industry's normal late first quarter acceleration in sales. Our performance was further affected by raw material cost increases and expenses incurred in launching our growth initiatives. "In response to higher raw material costs, we, along with most of our competitors, instituted a price increase in April. To address top-line growth, we intensified our focus on new product introductions in our high end businesses in 2002. The new product introductions have had a positive impact on sales in our high end business at Fabrica and Masland, which continue to grow, despite a decline in sales for the overall carpet industry. Also in 2002, we began developing the infrastructure and acquiring the marketing expertise to expand our participation in residential retail markets at price points below those of Fabrica and Masland. This endeavor, led by David Polley, introduced a collection of products this year at Surfaces under the Dixie Home name. The new collection has been very well received in the marketplace, resulting in excellent placement with leading retailers. The excitement created by this collection makes us optimistic that our North Georgia residential retail strategy will make a sound contribution to our sales and margins in the last half of this year. "The stronger order entry we began seeing in late March has continued and sales are significantly higher in most of our markets in April. We believe this improvement reflects positive acceptance of our new product introductions and rising consumer confidence, now that world events are stabilizing. Although second quarter results may be dampened somewhat by expenses associated with our growth initiatives and the continued weakness in the factory-built housing industry, we are optimistic that the carpet price increases, seasonal sales improvement and continued cost containment will result in improved financial results going forward."

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