Dixie 3Q Net Income Falls

Chattanooga, TN, October 30, 2007—Earnings for the Dixie Group fell in the third quarter compared to last year as the company reported net income of $2.2 million or $0.17 per diluted share, compared with net income of $2.6 million, or $0.20 per diluted share, for the third quarter of 2006.

Analysts were expecting EPS of $0.22 during the quarter.

Sales for the third quarter of 2007 were $82.4 million, down 1.5% from sales of $83.6 million in the year-earlier quarter.

For the first nine months of 2007, net income was $4.9 million, or $0.37 per diluted share, compared with net income of $4.4 million, or $0.34 per diluted share, in the 2006 period.

"Our carpet sales continued to outpace the carpet industry, which reported an 8.1% decline in sales for the third quarter compared with the third quarter of last year,” said Daniel K. Frierson, chairman and chief executive officer.

“The industry reported that sales of residential carpet declined 13.8% and sales of commercial carpet grew 2.5%. Our third quarter carpet sales were essentially flat. Sales of our residential carpet products were down 10.7% and commercial carpet product sales rose 23.8%. Our residential carpet business continued to be affected by general industry weakness and the significant decline in sales to one large home center customer. Sales to our other customers reflected an 8% decline in sales of residential carpet products and 2.3% growth in total carpet sales. During the third quarter, sales of our new modular/carpet tile products were over $1.5 million and sales of our commercial broadloom products grew over 18% compared with the year-earlier-quarter. "

Frierson said margins were flat despite higher costs, but carpet price increases should help fourth quarter results.

"Although it is impossible to predict the future, the slowing housing industry and tightening credit conditions will likely continue to impact demand for residential carpet products for the next several quarters,” Frierson said.

“The new products we are bringing to the market this year are well placed and beginning to generate sales. We believe these new wool and nylon products will allow us to continue to increase our share of the residential carpet market. The outlook for our commercial carpet business continues to be favorable.”

During the third quarter, Dixie purchased 79,128 shares of its common stock at an average per share price of $10.53.